What changed in this filing

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Item 1A. Risk Factors

2022-03-17 compared with 2021-03-18 · 124 added, 84 removed, 551 unchanged (27% of the section changed)

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● If we fail to develop and maintain proper and effective processes and operating procedures as a non-traditional government contractor, our ability to adhere to the DoD and related entity standards could impact our ongoing and future development financing awards from the U.S.

● We may not be entitled to forgiveness of our recently received Paycheck Protection Program Loan, and our application for the Paycheck Protection Program Loan could in the future be determined to have been impermissible or could result in damage to our reputation;

● If we are unable to obtain FDA approval of our products, we will not be able to commercialize our products in the United States;

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● A variety of risks associated with our international operations could materially adversely affect our business;

● We may face risks associated with build activities related to the lease agreement entered into during 2021 for future research and manufacturing needs;

● We depend upon key personnel who may terminate their employment with us at any time and we may need to hire additional qualified personnel in order to obtain financing, pursue collaborations or develop and market our product candidates;

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In March 2020, the World Health Organization declared COVID-19 a global pandemic and the United States declared a national emergency with respect to COVID-19.

In response to the COVID-19 pandemic, “shelter in place” orders and other public health guidance measures have been implemented across much of the United States and Europe, including in the locations of our principal place of business, clinical trial sites, and locations of our key vendors and partners.

Our clinical development program and preclinical study timelines have been and may continue to be negatively affected by COVID-19, which could materially and adversely affect our business, financial condition and results of operations.

For example, the COVID-19 pandemic has resulted in delays in our clinical trial due to the implementation of COVID-19 protocols resulted in longer than anticipated initiation activities at clinical sites.

In addition, while we currently do not anticipate any interruptions in our supply chain, it is possible that the COVID-19 pandemic and response efforts may have an impact in the future on our and/or our third-party suppliers and partners.

It is possible that due to the increasing emphasis on the development of vaccines for COVID-19, certain basic supply chain materials such as resins, vessels, vials and stoppers may be in high demand by the pharmaceutical companies developing vaccines and our ability to obtain these materials for our development activities could be negatively impacted.

We have experienced some delays of this nature in recent months

Further, due to “shelter in place” orders and other public health guidance measures, we have implemented a remote working policy.

Our increased reliance on personnel working from home may negatively impact productivity, or disrupt, delay or otherwise adversely impact our business.

For example, with our personnel working from home, some of our research activities that require our personnel to be in our laboratories may be delayed.

As a result of the COVID-19 pandemic, or similar pandemics, and related “shelter in place” orders and other public health guidance measures, we have and may in the future experience disruptions that could materially and adversely impact our clinical trials, business, financial condition and results of operations.

Potential disruptions include but are not limited to:

The COVID-19 pandemic continues to impinge upon the U.S.

and global economies and has directly and indirectly impacted our business, results of operations and financial condition and is expected to continue to impact our business.

For example, the COVID-19 pandemic has resulted in delays in our clinical trials due to the implementation of COVID-19 protocols at investigator sites, which resulted in longer than anticipated site identification and initiation activities.

In addition, while we currently do not anticipate any interruptions in our supply chain, it is possible that the COVID-19 pandemic and the continuing response efforts may have a future impact on our third-party suppliers and partners and the conduct of future clinical trials.

It is possible that due to the continued development and manufacturing of vaccines for COVID-19, certain basic supply chain materials such as resins, vessels, vials and stoppers may be in high demand by the pharmaceutical companies developing and manufacturing vaccines and our ability to obtain these materials for our development activities could be negatively impacted.

Although we have experienced some delays of this nature in 2021, such delays have not had a material adverse impact on our business, results of operations or financial condition.

Moreover, the COVID-19 pandemic may adversely affect the operations of the FDA and other health authorities, resulting in delays of reviews and approvals with respect to our product candidates.

While the full scope of the economic impact brought by, and the ultimate duration of, the COVID-19 pandemic remains difficult to assess or predict, the continued impact of the COVID-19 pandemic on the global financial markets may reduce our ability to access capital, which could negatively impact our short-term and long-term liquidity.

In addition, the loss of any of our employees as a result of COVID-19 (including as a result of vaccine mandates), or another pandemic, may adversely affect our operations.

The ultimate impact of the COVID-19 pandemic remains highly uncertain, and we do not yet know the full extent of potential delays or impacts that COVID-19 may have on our business, financing or clinical trial activities.

Some examples of potential disruptions that have resulted or may result from COVID-19 include but are not limited to:

delays or difficulties in enrolling patients in our clinical trials;

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delays or disruptions in preclinical experiments and IND-enabling studies due to restrictions of on-site staff and unforeseen circumstances at contract research organizations, or CROs, and vendors;

● interruption or delays in the operations of the FDA and comparable foreign regulatory agencies;

interruption or delays in the operations of the FDA and comparable foreign regulatory agency;

interruption of, or delays in receiving, supplies of our product candidates from our contract manufacturing organizations due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems;

delays in receiving approval from local regulatory authorities to initiate our planned clinical trials;

● limitations on employee or other resources that would otherwise be focused on the conduct of our clinical trials and pre-clinical work, including because of sickness of employees or their families, the desire of employees to avoid travel or contact with large groups of people, an increased reliance on working from home, school closures or mass transit disruptions;

limitations on employee or other resources that would otherwise be focused on the conduct of our clinical trials and pre-clinical work, including because of sickness of employees or their families, the desire of employees to avoid travel or contact with large groups of people, an increased reliance on working from home, school closures or mass transit disruptions or a refusal to comply with vaccine mandates;

changes in regulations as part of a response to the COVID-19 pandemic which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether;

delays in necessary interactions with regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government or contractor personnel;

● refusal of the FDA to accept data from clinical trials in affected geographies outside the United States.

These and other factors arising from the COVID-19 global pandemic could worsen in countries that are already afflicted with COVID-19, could continue to spread to additional countries or could return to countries where the pandemic has been partially contained, such as the current resurgence of cases in the United States, each of which could further adversely impact our ability to conduct clinical trials and our business generally, and could materially and adversely affect our business, financial condition and results of operations.

The COVID-19 global pandemic continues to rapidly evolve.

The extent to which the outbreak may affect our clinical trials, business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted at this time, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and actions to contain the outbreak or treat its impact, such as social distancing and quarantines or lock-downs in the United States and other countries, business closures or business disruptions, the effectiveness of actions taken in the United States and other countries to contain and treat the disease, and the development, approval and distribution of an effective vaccine.

interruption or delays in the operations of the FDA and comparable foreign regulatory agency;

The COVID-19 global pandemic remains volatile.

The extent to which the pandemic may affect our clinical trials, business, financial condition and results of operations remains dependent on future developments, which are highly uncertain and cannot be predicted at this time, such as the evolution and spread of COVID-19 variants, such as the Delta variant, the ultimate duration of the pandemic, business closures or business disruptions, the effectiveness of actions taken in the United States and other countries to contain and treat the disease, the acceptability, safety and effectiveness of COVID-19 vaccines, and compliance with vaccine mandates.

Future developments in these and other areas present material uncertainty and risk with respect to our clinical trials, business, financial condition and results of operations.

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Our financial statements as of December 31, 2021 and 2020 were prepared under the assumption that we will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.

At December 31, 2020, we had cash and cash equivalents of $9.6 million, and we have had recurring losses from operations and negative operating cash flows since inception.

As of December 31, 2021, we had cash and cash equivalents of $10.3 million, and we have had recurring losses from operations and negative operating cash flows since inception.

We will need to raise additional capital to support our operations and product development activities.

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We may also seek funds through arrangements with collaborators, grant agencies or others that may require us to relinquish rights to the product candidates that we might otherwise seek to develop or commercialize independently.

If we are unable to secure additional funds when needed or on acceptable terms, we may be required to defer, reduce or eliminate significant planned expenditures, restructure, curtail or eliminate some or all of our development programs or other operations, dispose of technology or assets, pursue an acquisition of our company by a third party at a price that may result in a loss on investment for our stockholders, enter into arrangements that may require us to relinquish rights to certain of our product candidates, technologies or potential markets, file for bankruptcy or cease operations altogether.

operations altogether.

Any of these events could have a material adverse effect on our business, financial condition and results of operations.

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See the section entitled “Business—Recent Developments” for a description of the 2021 Private Placement.

While we believe that our existing resources including the proceeds from the 2021 Private Placement will be sufficient to fund our planned operations into the first quarter of 2022, we cannot provide assurances that our estimates are accurate, that our plans will not change or that changed circumstances will not result in the depletion of our capital resources more rapidly than we currently anticipate.

On October 28, 2021, we completed a private placement (the “October 2021 Private Placement”) transaction in which we sold to CFF and Innoviva Strategic Opportunities LLC, a total of 2,121,213 shares of our newly issued shares of common stock, par value $0.01 per share, for aggregate gross proceeds of approximately $7.0 million, before deducting transaction expenses.

On February 9, 2022, we entered into a securities purchase agreement to sell our common stock and warrants to Innoviva (“February 2022 Private Placement”).

The gross proceeds from the transaction are expected to be $45 million, before deducting estimated offering expenses.

Pursuant and subject to the terms and conditions of the securities purchase agreement and related agreements, Innoviva will purchase 9,000,000 newly issued shares of our common stock, at a price of $5.00 per share, and warrants to purchase up to 4,500,000 additional shares of our common stock, with an exercise price of $5.00 per share.

The stock purchases are expected to occur in two tranches.

Upon execution, Innoviva purchased 3,614,792 shares of common stock and warrants to purchase 1,807,396 shares of common stock for an aggregate purchase price of approximately $18.1 million.

At the closing of the second tranche, upon our stockholders voting in favor of the transaction, Innoviva will purchase 5,385,208 shares of common stock and warrants to purchase 2,692,604 shares of common stock for an aggregate purchase price of $26.9 million.

Subject to the satisfaction of certain closing conditions, including the approval of our stockholders, the second closing contemplated by the securities purchase agreement is expected to occur near the end of the first quarter of 2022.

While we believe that our existing resources and expected proceeds from the second tranche of the February 2022 Private Placement will be sufficient to fund our planned operations into the first quarter of 2023, we cannot provide assurances that our estimates are accurate, that our plans will not change or that changed circumstances will not result in the depletion of our capital resources more rapidly than we currently anticipate.

Developing drugs and conducting clinical trials is expensive.

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Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or

by management override of the controls.

Controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.

Over time, controls may become inadequate because changes in conditions or deterioration in the degree of compliance with policies or procedures may occur.

Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Material weaknesses in our internal controls have been identified in the past, and we cannot assure you that significant deficiencies or material weaknesses in our internal control over financial reporting will not be identified in the future.

Material weaknesses in

our internal controls have been identified in the past, and we cannot assure you that significant deficiencies or material weaknesses in our internal control over financial reporting will not be identified in the future.

If we are unable to maintain effective controls and procedures, or identify any future material weaknesses, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports and we may experience a loss of public confidence, which could have an adverse effect on our business, financial condition and the market price of our common stock.

If we fail to develop and maintain proper and effective processes and operating procedures as a non-traditional government contractor, our ability to adhere to the Department of Defense and related entity standards could impact our ongoing and future development financing awards from the U.S.

On June 15, 2020, we entered into the “MTEC Agreement”, pursuant to which we have started to receive a $15 million grant and have entered into a three-year program administered by the DoD through MTEC with funding from the Defense Health Agency and Joint Warfighter Medical Research Program.

We plan to use the grant to partially fund a Phase 1b/2, randomized, double-blind, placebo-controlled, dose escalation clinical study of Armata's therapeutic phage-based candidate, AP-SA02, for the treatment of complicated S.

On June 15, 2020, we entered into an agreement with the Medical Technology Enterprise Consortium (“MTEC Agreement”), pursuant to which we have started to receive a $15 million grant and have entered into a three-year program administered by the DoD through MTEC with funding from the Defense Health Agency and Joint Warfighter Medical Research Program.

We plan to use the grant to partially fund a Phase 1b/2a, randomized, double-blind, placebo-controlled, dose-escalation clinical study of Armata's therapeutic phage-based candidate, AP-SA02, for the treatment of S.

aureus bacteremia infections.

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While we believe we are in compliance with all requirements under the MTEC Agreement, potential failure to maintain such compliance could result in reduction of the grant or termination of the contract, which could in turn negatively impact our business.

We may not be entitled to forgiveness of our recently received Paycheck Protection Program Loan, and our application for the Paycheck Protection Program Loan could in the future be determined to have been impermissible or could result in damage to our reputation.

In April 2020, we received loan proceeds of approximately $0.7 million (the “PPP Loan”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S.

Small Business Administration (the “SBA”).

We used the PPP Loan to retain current employees, maintain payroll and make lease and utility payments.

The PPP Loan is evidenced by a promissory note, which contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties.

The PPP Loan is scheduled to mature in April 2022 (the “Maturity Date”), bears interest at a rate of 1.00%

per annum, and is subject to the standard terms and conditions applicable to loans administered by the SBA under the CARES Act.

Commencing in August 2021, we are required to pay regular monthly payments in an amount equal to one month’s accrued interest under the PPP Loan.

All interest which accrues during the initial six months of the loan period will be deferred and payable on the Maturity Date.

The amounts outstanding under the PPP Loan may be prepaid by us at any time prior to maturity without penalty.

Under the CARES Act, as amended in June 2020, loan forgiveness is generally available for the sum of documented payroll costs, covered rent payments, covered mortgage interest and covered utilities during the 24-week period beginning on the date of the first disbursement of the PPP Loan.

The amount of the PPP Loan eligible to be forgiven may be reduced in certain circumstances, including as a result of certain headcount or salary reductions.

We will be required to repay any portion of the outstanding principal that is not forgiven, along with accrued interest, and we cannot provide any assurance that we will be eligible for loan forgiveness, that we will apply for forgiveness, or that any amount of the PPP Loan will ultimately be forgiven by the SBA.

In order to apply for the PPP Loan, we were required to certify, among other things, that the current economic uncertainty made the PPP Loan request necessary to support our ongoing operations.

We made this certification in good faith after analyzing, among other things, the maintenance of our workforce, our need for additional funding to continue operations, and our ability to access alternative forms of capital in the current market environment to offset the effects of the COVID-19 pandemic.

Following this analysis, we believe that we satisfied all eligibility criteria for the PPP Loan, and that our receipt of the PPP Loan is consistent with the broad objectives of the CARES Act.

The certification described above did not contain any objective criteria and is subject to interpretation.

On April 23, 2020, the SBA issued guidance stating that it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith.

The lack of clarity regarding loan eligibility under the Paycheck Protection Program has resulted in significant media coverage and controversy with respect to public companies applying for and receiving loans.

If, despite our good-faith belief that given our circumstances we satisfied all eligible requirements for the PPP Loan, we are later determined to have violated any applicable laws or regulations that may apply to us in connection with the PPP Loan or it is otherwise determined that we were ineligible to receive the PPP Loan, we may be required to repay the PPP Loan in its entirety and/or be subject to additional penalties, which could also result in adverse publicity and damage to our reputation.

Should we be audited or reviewed by federal or state regulatory authorities as a result of filing an application for forgiveness of the PPP Loan or otherwise, such audit or review could result in the diversion of management’s time and attention and legal and reputational costs.

If we were to be audited or reviewed and receive an adverse determination or finding in such audit or review, we could be required to return the full amount of the PPP Loan.

Any of these events could have a material adverse effect on our business, results of operations and financial condition.

Risks Related to Our Business

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We do not currently have the required approvals to market our product candidates and we may never receive them.

We may not be profitable even if we or any of our future development partners succeed in commercializing any of our product candidates.

We may not be profitable even if we or any of our future development

partners succeed in commercializing any of our product candidates.

Because of the numerous risks and uncertainties associated with developing and commercializing our product candidates, we are unable to predict the extent of any future losses or when it will become profitable, if at all.

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In addition, we have used our bacteriophage technology in the area of targeted medicine under single-patient expanded access guidelines, which permit the use of phage therapy outside of clinical trials, in the United States and Australia.

Despite prior single-patient expanded access successes, no assurance can be given that we will have similar single-patient expanded access treatment successes in the future.

Despite prior single-patient expanded access successes, no assurance can be given that we will have similar

single-patient expanded access treatment successes in the future.

Single-patient expanded access is a term that is used to refer to the use of an investigational drug or therapy outside of a clinical trial to treat a patient with a serious or immediately life-threatening disease or condition who has no comparable or satisfactory alternative treatment options.

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In some countries, such as Australia, the treating physician can administer treatment under single-patient expanded access guidelines without pre-approval from the applicable regulatory authority.

In September 2018, we received the official minutes from our August 2018 Type B pre-IND meeting with the FDA regarding our AP-SA01 bacteriophage therapy product candidate.

The FDA expressed general agreement with our proposed clinical trial designs and, based on the current FDA feedback, no additional clinical or nonclinical data are required to proceed with human clinical trials.

Subsequent to the Type B meeting, we have changed the bacteriophage product candidate to AP-SA02.

While we believe the FDA comments and stances related to AP-SA01 will apply to AP-SA02, there can be no assurances that is the case.

To satisfy FDA or foreign regulatory approval standards for the commercial sale of our product candidates, we must demonstrate in adequate and controlled clinical trials that our product candidates are safe and effective.

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Delays in our clinical trials could result in us not achieving anticipated developmental milestones when expected, increased costs and delay our ability to obtain regulatory approval for and commercialize our product candidates.

Delays in our ability to commence or enroll patients for our clinical trials could result in us not meeting anticipated clinical milestones and could materially impact our product development costs and delay regulatory approval of our

product candidates.

Planned clinical trials may not be commenced or completed on schedule, or at all.

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● delays in reaching agreement on acceptable clinical trial agreement terms with prospective sites or obtaining institutional review board approval;

● changes in local regulations as part of a response to the COVID-19 outbreak, which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether;

● changes in local regulations as part of a response to the COVID-19 pandemic, which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether;

● adverse safety events experienced during our clinical trials.

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The manufacturing processes for our product candidates, and the scale-up of such processes for clinical trials, is novel, and there can be no assurance that we will be able to complete this work in a timely manner, if at all.

The manufacture of our product candidates requires significant expertise and capital investment, including the

development of advanced manufacturing techniques and process controls.

The manufacture of our product candidates requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls.

Manufacturers often encounter difficulties in production, particularly in scaling up for commercial production.

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If we were to encounter any of these difficulties, our ability to provide our products to patients in our clinical trials or to commercially launch a product would be jeopardized.

Any delay or interruption could postpone the completion of our clinical trials, increase the costs associated with maintaining our clinical trial program and, depending upon the period of delay, require us to commence new trials at significant additional expense or terminate the trials completely.

Any delay or interruption could postpone the

completion of our clinical trials, increase the costs associated with maintaining our clinical trial program, and, depending upon the period of delay, require us to commence new trials at significant additional expense or terminate the trials completely.

Any delay in the development or scale up of these manufacturing processes could delay the start of clinical trials and harm our business.

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We require the approval of the relevant regulatory authorities before we may commence commercial sales of our product candidates in a given market.

The regulatory approval process is expensive and time-consuming, and the timing of receipt of regulatory approval is difficult to predict.

The regulatory approval process is expensive and time-consuming, and the timing of receipt of regulatory approval is

difficult to predict.

Our product candidates could require a significantly longer time to gain regulatory approval than expected, or may never gain approval.

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In the United States, numerous federal and state laws and regulations, including federal health information privacy laws, state data breach notification laws, state health information privacy laws and federal and state consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), that govern the collection, use, disclosure and protection of health-related and other personal information could apply to our operations or the operations of our collaborators.

In addition, we may obtain health information from third parties (including research institutions from which we obtain clinical trial data) that are subject to privacy and security requirements under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by the Health Information Technology for Economic and Clinical Health (“HITECH”).

Depending on the facts and circumstances, we could be subject to criminal penalties if we knowingly obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.

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The GDPR went into effect on May 25, 2018.

The GDPR introduced new data protection requirements in the European Union, as well as potential fines for noncompliant companies of up to the greater of €20 million or 4% of annual global revenue.

The GDPR introduced new data protection requirements in the European Union, as well as potential fines for non-compliant companies of up to the greater of €20 million or 4% of annual global revenue.

The regulation imposes numerous new requirements for the collection, use and disclosure of personal information, including more stringent requirements relating to consent and the information that must be shared with data subjects about how their personal information is used, the obligation to notify regulators and affected individuals of personal data breaches, extensive new internal privacy governance obligations and obligations to honor expanded rights of individuals in relation to their personal information (e.g., the right to access, correct and delete their data).

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The GDPR will increase our responsibility and liability in relation to personal data that we process, and we may be required to put in place additional mechanisms to ensure compliance with the new EU data protection rules.

Further, the United Kingdom’s vote in favor of

exiting the EU, often referred to as Brexit, has created uncertainty with regard to data protection regulation in the United Kingdom.

Further, the United Kingdom’s vote in favor of exiting the EU, often referred to as Brexit, has created uncertainty with regard to data protection regulation in the United Kingdom.

In particular, it is unclear whether the United Kingdom will enact data protection legislation equivalent to the GDPR and how data transfers to and from the United Kingdom will be regulated.

In addition, California recently enacted legislation that has been dubbed the first “GDPR-like” law in the United States.

Known as the California Consumer Privacy Act, it creates new individual privacy rights for consumers (as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households.

The CCPA requires covered companies to provide new disclosures to California consumers, provide such consumers new ways to opt-out of certain sales of personal information, and allow for a new cause of action for data breaches.

Known as the California Consumer Privacy Act (“CCPA”), it creates new individual privacy rights for consumers (as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households.

The CCPA requires covered companies to provide new disclosures to California consumers, provide such consumers new ways to opt-out of certain sales of personal information, and allow

for a new cause of action for data breaches.

The CCPA may impact (possibly significantly) our business activities and exemplifies the vulnerability of our business to the evolving regulatory environment related to personal data and protected health information.

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These and other risks associated with our international operations may materially adversely affect our business, financial condition and results of operations.

We may face risks associated with build activities related to the lease agreement entered into during 2021 for future research and manufacturing needs

On October 28, 2021, we entered into a lease for office and research and development space under a non-cancellable lease in Los Angeles, CA (the “2021 Lease”).

Under the 2021 Lease, together with the landlord, we are required to engage in significant construction activities prior to occupation of the leased premises, currently expected in 2022.

While we are entitled to receive an allowance for tenant improvements of up to $7.3 million, we are required to expend our existing cash resources for construction costs in advance of the landlord reimbursing us for these costs and for all amounts above the agreed tenant improvement allowance.

We are subject to potential construction delays and the resultant increased costs and risks, as well as uncertainties related to the contractors’ ability to build in conformity with plans, specifications, budgeted costs and timetables.

If the contractors or developer fails to perform, we may modify the construction contract or resort to legal action to compel performance.

A developer’s or builder’s performance may also be affected or delayed by conditions beyond that party’s control, such as the supply chain delays.

The landlord is also subject to uncertainties associated with obtaining permits for development, environmental and land use concerns of governmental entities.

All the factors above could have a negative impact on our financial positions and development plans for our business.

Moreover, as we rarely engage in construction activities, substantial renovation and construction activities could require a significant amount of management’s time and attention, diverting the attention of our management from other strategic matters.

Innoviva, our principal shareholder, beneficially owns greater than 50% of our outstanding shares of common stock, which will cause us to be deemed a “controlled company” under the rules of NYSE.

In addition, Innoviva’s interests in our business may be different than our other shareholders.

Upon closing of both the first and second tranche of the February 2022 Private Placement, Innoviva expects to own approximately 70% of our outstanding shares and 19,364,647 warrants to purchase shares of our common stock.

If Innoviva were to exercise the warrants held by them, they would hold approximately 77.6% of our issued and outstanding shares of common stock.

s a result, Innoviva owns more than 50% of our outstanding shares, and as such, we are a “controlled company” under the rules of the NYSE.

Under these rules, a company of which more than 50% of the voting power is held by an individual, a group or another company is a “controlled company” and, as such, may elect to be exempt from certain corporate governance requirements, including requirements that:

a majority of the board of directors consist of independent directors;

the board of directors maintain a nominating and corporate governance comprised solely of independent directors and with a written charter addressing the committee’s purpose and responsibilities;

the board of director maintain a compensation committee comprised solely of independent directors and with a written charter addressing the committee’s purpose and responsibilities.

As a “controlled company,” we may elect to rely on some or all of these exemptions, however, we do not intend take advantage of any of these exemptions.

Despite the fact we do not intend to take advantage of these exemptions, our status as a controlled company could make our common stock less attractive to some investors or otherwise harm our stock price.

We depend upon key personnel who may terminate their employment with us at any time and we may need to hire additional qualified personnel in order to obtain financing, pursue collaborations or develop and market our product candidates

Our success depends on our continued ability to attract, retain and motivate highly qualified management, clinical, manufacturing, and scientific personnel and on our ability to develop and maintain important relationships with leading academic institutions, clinicians and scientists.

Our success will depend on our ability to retain and motivate personnel and hire additional qualified personnel when required, including personnel with expertise in clinical trials, government regulation, cGMP manufacturing, and other areas.

Our success will depend on our ability to retain and motivate personnel

and hire additional qualified personnel when required, including personnel with expertise in clinical trials, government regulation, cGMP manufacturing, and other areas.

Competition for qualified personnel in the biotechnology field is intense.

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Trade secrets are difficult to protect, especially in the pharmaceutical industry, where much of the information about a product must be made public during the regulatory approval process.

Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, outside

scientific collaborators and other advisors may unintentionally or willfully disclose our information to competitors.

Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, outside scientific collaborators and other advisors may unintentionally or willfully disclose our information to competitors.

Enforcing a claim that a third party illegally obtained and is using our trade secret information is expensive and time-consuming, and the outcome is unpredictable.

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In addition, because patent applications can take many years to issue, there may be currently pending patent applications, unknown to us, which may later result in issued patents that our product candidates may infringe, or which may trigger an interference proceeding regarding one of our owned or licensed patents or applications.

There could also be existing patents of which we are not aware that our product candidates may inadvertently infringe or which may become involved in an interference proceeding.

There could also be existing patents of which

we are not aware that our product candidates may inadvertently infringe or which may become involved in an interference proceeding.

The biotechnology and pharmaceutical industries are characterized by the existence of a large number of patents and frequent litigation based on allegations of patent infringement.

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

Smaller or early-stage

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

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

Our competitors may succeed in developing products that are more effective, have fewer side effects and are safer or more affordable than our product candidates, which would render our product candidates less competitive or noncompetitive.

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we expect to experience pricing pressures in connection with the sale of any products that we develop due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, and additional legislative proposals.

In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (collectively, the “ACA”), became law in the United States, which substantially

changed the way healthcare is financed by both governmental and private insurers.

While we cannot predict what impact on federal reimbursement policies this legislation will have in general or on our business specifically, the ACA and any amendments thereto may result in downward pressure on pharmaceutical reimbursement, which could negatively affect market acceptance of, and the price we may charge for, our products that receive regulatory approval.

While we cannot predict what impact on federal reimbursement policies this legislation will have in general or on our business specifically, the ACA and any amendments thereto may result in downward pressure on pharmaceutical reimbursement, which could negatively affect the market acceptance of, and the price we may charge for, our products that receive regulatory approval.

We also cannot predict the impact of ACA and its amendments on us as many of the ACA, as amended, requires the promulgation of detailed regulations implementing the statutory provisions, which have not yet been fully implemented.

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Innoviva may exert a substantial influence on actions requiring stockholder vote, potentially in a manner that you do not support.

Following the second closing of the 2021 Private Placement, Innoviva holds approximately 59.6% of our outstanding shares and 14,864,647 warrants to purchase shares of our common stock.

If Innoviva were to exercise the warrants held by them, they would hold approximately 77.6% of our issued and outstanding shares of common stock.

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As of December 31, 2021, we had outstanding common warrants to purchase an aggregate of 16,647,219 shares of our common stock at a weighted-average exercise price of $3.98 per share.

As of December 31, 2020, in-the-money warrants included warrants issued to Innoviva during 2020 Private Placement which have an exercise price of $2.87 per share.

As of December 31, 2021, in-the-money warrants included warrants issued to Innoviva during the January 2021 Private Placement which have an exercise price of $3.25, as well as warrants issued to Innoviva during the 2020 Private Placement which have an exercise price of $2.87 per share.

We also have outstanding options to exercise 2,409,682 shares of our common stock at a weighted-average exercise price of $5.64 per share.

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Our business and operations might be adversely affected by security breaches, including any cybersecurity incidents.

We depend on the efficient and uninterrupted operation of our computer and communications systems, which we use for, among other things, sensitive company data, including our financial data, intellectual property and other proprietary business information.

While certain of our operations have business continuity and disaster recovery plans and other security measures intended to prevent and minimize the impact of IT-related interruptions, our IT infrastructure and the IT infrastructure of our consultants, contractors and vendors are vulnerable to damage from cyberattacks, computer viruses, unauthorized access, electrical failures and natural disasters or other catastrophic events.

We depend on the efficient and uninterrupted operation of our computer and communications systems and those of third parties with which we contract, which we use for, among other things, sensitive company data, including our financial data, intellectual property and other proprietary business information.

While certain of our operations have business continuity and disaster recovery plans and other security measures intended to prevent and minimize the impact of IT-related interruptions, our IT infrastructure and the IT infrastructure of our consultants, contractors and vendors are vulnerable to damage from cyberattacks, ransomware and other malware incidents, computer viruses, unauthorized access, electrical failures and natural disasters, terrorism, war or other catastrophic events.

We could experience failures in our information systems and computer servers, which could result in an interruption of our normal business operations and require substantial expenditure of financial and administrative resources to remedy.

System failures, accidents or security breaches can cause interruptions in our operations and can result in a material disruption of our targeted phage therapies, bacteriophage product candidates and other business operations.

System failures, accidents or security breaches can cause interruptions in our operations and can result in a material disruption of our clinical and commercialization activities, targeted phage therapies, bacteriophage product candidates and other business operations.

The loss of data from completed or future studies or clinical trials could result in delays in our research, development or regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

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Moreover, any such event could delay the development of our product candidates.

In the ordinary course of our business, we may collect and store sensitive data, including legally protected health information, personally identifiable information, intellectual property, and proprietary business information.

risks relative to protecting this critical information, including loss of access risk, inappropriate disclosure risk, inappropriate modification risk and the risk of being unable to adequately monitor our controls.

Office of Civil Rights in the Department of Health and Human Services enforces the HIPAA privacy and security rules and may impose penalties for failure to comply with requirements of HIPAA.

Penalties will vary significantly depending on factors such as whether failure to comply was due to willful neglect.

These penalties include civil monetary penalties of $100 to $50,000 per violation, up to an annual cap of $1,500,000 for identical violations.

A person who knowingly obtains or discloses individually identifiable health information in violation of HIPAA may face a criminal penalty of up to $50,000 per violation and up to one-year imprisonment.

The criminal penalties increase to $100,000 per violation and up to five-years imprisonment if the wrongful conduct involves false pretenses, and to $250,000 per violation and up to 10-years imprisonment if the wrongful conduct involves the intent to sell, transfer, or use identifiable health information for commercial advantage, personal gain, or malicious harm.

Department of Justice is responsible for criminal prosecutions under HIPAA.

Furthermore, in the event of a breach as defined by HIPAA, there are reporting requirements to the U.S.

Office of Civil Rights under the HIPAA regulations as well as to affected individuals, and there may also be additional reporting requirements to other state and federal regulators, including the Federal Trade Commission, and to the media.

Issuing such notifications can be costly, time and resource intensive, and can generate significant negative publicity.

Breaches of HIPAA may also constitute contractual violations that could lead to contractual damages or terminations.

In addition, the interpretation and application of consumer, health-related and data protection laws in the United States, the European Union, and elsewhere are often uncertain, contradictory and in flux.

It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our practices.

If so, this could result in government-imposed fines or orders requiring that we change our practices, which could adversely affect our business.

In addition, these privacy regulations vary between states, may differ from country to country, and may vary based on whether testing is performed in the United States or in the local country.

Complying with these various laws could cause us to incur substantial costs or require us to change our business practices and compliance procedures in a manner adverse to our business.

For example, we may be subject to privacy laws and regulations such as the European Union’s General Data Privacy Regulation (“GDPR”) and the California Consumer Privacy Act (“CCPA”).

These regulations mandate that companies satisfy requirements regarding the handling of personal and sensitive data, including its use, protection, and the ability of persons whose data is stored to correct or delete such data about themselves.

Failure to comply with GDPR requirements could result in penalties of up to four percent of worldwide revenue.

The GDPR, CCPA, and other similar laws and regulations, as well as any associated inquiries or investigations or any other government actions, may be costly to comply with, increase our operating costs, require significant management time and attention, and subject us to remedies that may harm our business, including fines, negative publicity, or demands or orders that we modify or cease existing business practices.

Interruptions in the availability of server systems or communications with Internet or cloud based services, or failure to maintain the security, confidentiality, accessibility or integrity of data stored on such systems, could harm our business.

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If our security measures or those of our third-party data center hosting facilities, cloud computing platform providers, or third-party service partners, are breached, and unauthorized access is obtained to our data or our information technology systems, we may incur significant legal and financial exposure and liabilities.

We do not have control over the operations of the facilities of our cloud service providers and our third-party providers may be vulnerable to damage or interruption from natural disasters, cybersecurity attacks, terrorist attacks, power outages and similar events or acts of misconduct.

power outages and similar events or acts of misconduct.

In addition, any changes in our cloud service providers’ service levels may adversely affect our ability to meet our requirements and operate our business.

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We have incurred, and will continue to incur, capital and operating expenditures and other costs in the ordinary course of our business in complying with these laws and regulations.

Although we believe our safety procedures for handling and disposing of these materials comply with federal, state and local laws and regulations, we cannot entirely eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of hazardous materials.

storage, handling or disposal of hazardous materials.

In the event of contamination or injury, we could be held liable for any resulting damages, and any liability could significantly exceed our insurance coverage.

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If tax authorities were to allocate income to a higher tax jurisdiction, subject our income to double taxation or assess interest and penalties, it would increase our consolidated tax liability, which could adversely affect our financial condition, results of operations and cash flows.

Increased scrutiny of our environmental, social or governance responsibilities will likely result in additional costs and risks and may adversely impact our reputation, employee retention and willingness of customers and suppliers to do business with us.

There is an increasing focus from certain customers, consumers, employees and other stakeholders concerning environmental, social and governance (“ESG”) matters, including corporate citizenship and sustainability.

Additionally, public interest and legislative pressure related to public companies’ ESG practices continues to grow.

If our ESG practices fail to meet regulatory requirements or stakeholders’ evolving expectations and standards for responsible corporate citizenship in areas including environmental stewardship, support for local communities, Board of Director and employee diversity, human capital management, employee health and safety practices, corporate governance and transparency and employing ESG strategies in our operations, our brand, reputation and employee retention may be negatively impacted, and customers and suppliers may be unwilling to do business with us.

In addition, aligning our ESG practices with industry standards will likely require us to expand our disclosures in these areas.

We also expect to incur additional costs and require additional resources to monitor, report and comply with our various ESG practices.

The standards for tracking and reporting on ESG matters are relatively new, have not been harmonized and continue to evolve.

The disclosure frameworks we choose to align with, if any, may change from time-to-time and may result in a lack of consistent or meaningful comparative data from period to period.

Ensuring there are systems and processes in place to comply with various ESG tracking and reporting obligations will require management time and expense.

In addition, our processes and controls may not always comply with evolving standards for identifying, measuring and reporting ESG metrics, our interpretation of reporting standards may differ from those of others and such standards may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals.

If we fail to adopt ESG standards or practices as quickly as stakeholders desire, fail, or be perceived to fail, in our achievement of such initiatives or goals, or fail in fully and accurately reporting our progress on such initiatives and goals, our reputation, business, financial performance and growth may be adversely impacted.

In addition, we could be criticized for the scope of such initiatives or goals or perceived as not acting responsibly in connection with these matters.

Our business could be negatively impacted by such matters.

Any such matters, or related corporate citizenship and sustainability matters, could have a material adverse effect on our business.

UNRESOLVED STAFF COMMENTS

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What changed 10-K

Item 1A. Risk Factors