What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-03-16 compared with 2022-03-17 · 126 added, 95 removed, 580 unchanged (28% of the section changed)

You should consider carefully the following information about the risks described below, together with the other information contained in this Annual Report and in our other public filings in evaluating our business.

If any of the following risks actually occur, our business, financial condition, results of operations, and future growth prospects would likely be materially and adversely affected.

Investors should be aware that it is not possible to predict or identify all such factors and that the following is not meant to be a complete discussion of all potential risks or uncertainties.

Additionally, our business is subject to general risks applicable to any company, such as economic conditions, geopolitical events, extreme weather and natural disasters.

If known or unknown risks or uncertainties materialize, our business, financial condition, results of operations, and future growth prospects would likely be materially and adversely affected.

In these circumstances, the market price of our common stock would likely decline.

In addition, the global economic climate and effects of the COVID-19 pandemic may amplify many of the risks described below or their impact on us.

The following discussion of risk factors contains forward-looking statements, as discussed in the Special Note Regarding Forward-Looking Statements section in this Annual Report.

Summary of Risk Factors

2 unchanged sentences

These risks include, among others, the following:

● Public health crises such as pandemics or similar outbreaks could materially and adversely affect our preclinical and clinical trials, business, financial condition and results of operations;

● There is substantial doubt about our ability to continue as a going concern, which may affect our ability to obtain future financing and may require us to curtail our operations.

We will need to raise additional capital to support our operations;

● Public health crises such as pandemics or similar outbreaks could materially and adversely affect our preclinical and clinical trials, business, financial condition and results of operations;

● We have incurred losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future, and our future profitability is uncertain;

● We have never generated any revenue from product sales and may never be profitable;

● Maintaining and improving our financial controls and the requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members;

● If we fail to maintain proper and effective internal control over financial reporting, our ability to produce accurate financial statements on a timely basis could be impaired and our public reporting may be unreliable;

8 unchanged sentences

● We must continue to develop manufacturing processes for our product candidates and any delay in or our inability to do so would result in delays in our clinical trials;

● Any deficiencies or failures in our ability to successfully transfer our manufacturing processes to our new manufacturing facility located in Los Angeles, and abide by cGMP regulations with respect to the new facility could lead to a material adverse impact on our business, results of operations, financial conditions, and prospects;

● We may conduct clinical trials for our products or product candidates outside the United States and the FDA may not accept data from such trials;

6 unchanged sentences

● We rely on third parties to conduct our clinical trials, and their failure to perform their obligations in a timely or competent manner may delay development and commercialization of our product candidates;

● We may not be able to obtain materials or supplies necessary to conduct clinical trials or to manufacture our product candidates in a timely manner, which could have an adverse impact on our results of operations and may delay development and commercialization of our product candidates;

● We are dependent on patents, trade secrets and other forms of non-patent intellectual property protection.

8 unchanged sentences

● The price of our common stock has been and may continue to be volatile;

● Conversion of our convertible notes will dilute the ownership interest of existing stockholders, or may otherwise depress the market price of our common stock;

● We have never paid dividends on our common stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future.

Risks Related to Our Financial Condition and Need for Additional Capital

Public health crises such as pandemics or similar outbreaks could materially and adversely affect our preclinical and clinical trials, business, financial condition and results of operations.

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.

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;

delays or difficulties in initiating or expanding clinical trials, including delays or difficulties with clinical site initiation and recruiting clinical site investigators and clinical site staff;

increased rates of patients withdrawing from our clinical trials following enrollment as a result of contracting COVID-19 or other health conditions or being forced to quarantine;

interruption of key clinical trial activities, such as clinical trial site data monitoring and efficacy, safety and translational data collection, processing and analyses, due to limitations on travel imposed or recommended by federal, state or local governments, employers and others or interruption of clinical trial subject visits, which may impact the collection and integrity of subject data and clinical study endpoints;

diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

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 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 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;

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.

There is substantial doubt about our ability to continue as a going concern, which may affect our ability to obtain future financing and may require us to curtail our operations.

We will need to raise additional capital to support our operations.

The audited financial statements and accompanying notes thereto included disclosures and an opinion from our independent registered public accounting firm stating that our recurring losses and negative cash flows from operations raise substantial doubt about our ability to continue as a going concern.

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.

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.

The audited consolidated financial statements and accompanying notes thereto included disclosures that our recurring losses and negative cash flows from operations raise substantial doubt about our ability to continue as a going concern.

Our financial statements as of December 31, 2022 and December 31, 2021 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.

As of December 31, 2022, we had unrestricted cash and cash equivalents of $14.9 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.

In the near term, we expect to continue to fund our operations, if at all, primarily through equity and debt financings.

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

Our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, financial markets in the United States and worldwide.

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.

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

1 unchanged sentence

The 2020 Private Placement was closed in two tranches for total aggregate gross proceeds of $25.0 million.

On January 26, 2021, we entered into the 2021 Securities Purchase Agreement in connection with the 2021 Private Placement.

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

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.

During 2021, we entered into a securities purchase agreement in connection with certain private placements.

See Note 2 to consolidated financial statements contained in this report for a description of the 2021 private placements.

On October 28, 2021, we completed a private placement (the “October 2021 Private Placement”) transaction in which we sold to CFF and Innoviva SO (a wholly owned subsidiary of Innoviva, Inc., a principal stockholder of us) 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.

Pursuant and subject to the terms and conditions of the securities purchase agreement and related agreements, Innoviva agreed to 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 occurred in two tranches.

On February 9, 2022, 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.

On March 31, 2022, upon our stockholder s voting in favor of the transaction, Innoviva purchased 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.

On January 10, 2023, we entered into, as borrower, a secured convertible credit and security agreement (the “Credit Agreement”) with Innoviva SO.

The Credit Agreement provides for a secured term loan facility in an aggregate amount of $30 million (the “Loan”) at an interest rate of 8.0% per annum, and has a maturity date of January 10, 2024.

Repayment of the Loan is required to be guaranteed by our domestic subsidiaries and foreign material subsidiaries, and the Loan is secured by substantially all of our assets and the subsidiary guarantors.

While we believe that our existing resources will be sufficient to fund our planned operations into the third 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.

10 unchanged sentences

Any additional fundraising efforts may divert our management from their day to day activities, which may adversely affect our ability to develop and commercialize our product candidates.

Our ability to raise additional funds will depend, in part, on the success of our product development activities, including our targeted phage therapies strategy and any clinical trials we initiate, regulatory events, our ability to identify and enter into in-licensing or other strategic arrangements, and other events or conditions that may affect our value or prospects, as well as factors related to financial, economic and market conditions, many of which are beyond our control.

arrangements, and other events or conditions that may affect our value or prospects, as well as factors related to financial, economic and market conditions, many of which are beyond our control.

There can be no assurances that sufficient funds will be available to us when required or on acceptable terms, if at all.

Public health crises such as pandemics or similar outbreaks could materially and adversely affect our preclinical and clinical trials, business, financial condition and results of operations.

Any significant outbreak of contagious diseases and other adverse public health developments in countries where we operate could have a material and adverse effect on our business, financial condition and results of operations.

As a result of the COVID-19 pandemic and the related responses from government authorities, our operations, strategy, and financial performance have been affected in a number of ways, and may be further adversely impacted by a variety of factors, including, but not limited to, the following:

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;

delays or difficulties in initiating or expanding clinical trials, including delays or difficulties with clinical site initiation and recruiting clinical site investigators and clinical site staff;

increased rates of patients withdrawing from our clinical trials following enrollment as a result of contracting COVID-19 or other health conditions or being forced to quarantine;

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 agency;

a slow down or stoppage in the supply chain of our raw materials, components, equipment and distribution services used to manufacture our products and deliver to clinical investigator sites;

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

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

As the COVID-19 pandemic reaches an endemic state, the extent to which it may affect our clinical trials, business operations, financial condition and results of operations remains dependent on future developments, which are highly uncertain and cannot be predicted at this time.

Although COVID-19 infection rates and severity have decreased recently, the occurrence, spread, severity and duration of any new outbreaks or resurgences, including the emergence and spread of new variants of COVID-19, actions taken to contain the resurgences or variants, and economic repercussions of the virus remain uncertain.

We continue to evaluate the nature and extent to which COVID-19 may impact our business and operations .

We have incurred losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future, and our future profitability is uncertain.

1 unchanged sentence

We have devoted, and will continue to devote for the foreseeable future, substantially all of our resources to research and development of our product candidates.

For the years ended December 31, 2021 and 2020, we had losses from operations of $23.8 million and $21.6 million, respectively.

Additional information regarding our results of operations may be found in our consolidated financial statements and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 2 in this report.

For the year ended December 31, 2022 and the year ended December 31, 2021, we had losses from operations of $36.9 million and $23.8 million, respectively.

We have never generated any revenue from product sales and may never be profitable.

19 unchanged sentences

Even if we are able to generate revenues from the sale of any approved products, we may not become profitable and may need to obtain additional funding to continue operations.

Maintaining and improving our financial controls and the requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules of the NYSE American.

18 unchanged sentences

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.

1 unchanged sentence

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.

On September 29, 2022, the MTEC Agreement was modified to increase the total award by $1.3 million to $16.3 million and extend the term into the third quarter of 2024.

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.

aureus bacteremia.

As an organization, we are relatively new to government contracting and new to the regulatory compliance obligations that such contracting entails.

13 unchanged sentences

We have incurred significant operating losses since our inception and expect to incur significant losses for the foreseeable future as we continue our development programs for our product candidates.

We maintain our cash and cash equivalents with high quality, accredited financial institutions.

However, some of these accounts exceed federally insured limits, and, while we believe the Company is not exposed to significant credit risk due to the financial strength of these depository institutions or investments, the failure or collapse of one or more of these deposityory institutions or default on these investments could materially adversely affect our ability to recover these assets and/or materially harm our financial condition.

We currently generate no revenue from product sales, and may never be able to commercialize our product candidates, or other future product candidates.

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.

5 unchanged sentences

Satisfaction of the approval requirements typically takes several years and the time needed to satisfy them may vary substantially, based on the type, complexity and novelty of the product.

We do not know if or when we might receive regulatory approvals, including approval for an Investigational New Drug application (“IND application”), for any of our product candidates currently under development, other than for our product candidate AP-PA02, for which we received FDA clearance of our IND application.

We do not know if or when we might receive regulatory approvals, including approval for an Investigational New Drug application (“IND application”), for any of our product candidates currently under development, other than for our product candidates AP-PA02 and AP-SA02, for which we received FDA clearance of our respective IND applications.

Moreover, approvals that we obtain may not cover all of the clinical indications for which we are seeking approval, or could contain significant limitations in the form of narrow indications, warnings, precautions or contra-indications with respect to conditions of use.

14 unchanged sentences

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.

14 unchanged sentences

Developing phage-based therapies on a commercial scale will also require developing new manufacturing processes and techniques.

We and our third-party collaborators may experience delays in developing manufacturing capabilities for our product candidates, and may not be able to do so at the scale required to efficiently conduct the clinical trials required to obtain regulatory approval of our product candidates, or to manufacture commercial quantities of our products, if approved.

We and our third-party collaborators may experience delays in developing manufacturing capabilities for our product candidates and may not be able to do so at the scale required to efficiently conduct the clinical trials required

to obtain regulatory approval of our product candidates, or to manufacture commercial quantities of our products, if approved.

In addition, the FDA or other regulatory agencies may lack experience in evaluating the safety and efficacy of drugs based on these approaches, which could lengthen the regulatory review process, increase our development costs and delay or prevent commercialization of our product candidates.

51 unchanged sentences

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.

5 unchanged sentences

Furthermore, if we fail to deliver the required commercial quantities on a timely basis, pursuant to provided specifications and at commercially reasonable prices, we may be unable to meet demand for our products and would lose potential revenues.

Any deficiencies or failures in our ability to successfully transfer our manufacturing processes to our new manufacturing facility located in Los Angeles, and abide by cGMP regulations with respect to the new facility could lead to a material adverse impact on our business, results of operations, financial conditions, and prospects.

In October 2021, we entered into a lease for office and research and development space under a lease in Los Angeles, CA (the “2021 Lease”), which also includes a new manufacturing facility.

Our new manufacturing facility will require satisfactory cGMP inspections for the manufacture of our product candidates as we transfer our manufacturing processes to the new facility.

The new facility will be subject to ongoing periodic inspection by the FDA for compliance with cGMP regulations.

Compliance with these regulations and standards is complex and costly, and there can be no assurance that we will be able to comply.

Any failure to comply with applicable regulations could result in sanctions being imposed (including fines, injunctions, and civil penalties), failure of regulatory authorities to grant marketing approval of our product candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions, and criminal prosecution.

If we cannot successfully produce material that conforms to our specifications and cGMP requirements of any applicable regulatory agency, we may not be able to secure or maintain approval for our new manufacturing facility.

We may conduct clinical trials for our products or product candidates outside the United States and the FDA may not accept data from such trials.

19 unchanged sentences

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.

11 unchanged sentences

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.

9 unchanged sentences

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 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.

8 unchanged sentences

operations, we have operations and a subsidiary in Australia and a subsidiary company in the United Kingdom.

We face risks associated with our international operations, including possible unfavorable regulatory, pricing and reimbursement, political, tax and labor conditions, which could harm our business.

We face risks associated with our international operations, including possible unfavorable regulatory,

pricing and reimbursement, political, tax and labor conditions, which could harm our business.

We are subject to numerous risks associated with international business activities, including:

14 unchanged sentences

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.

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

4 unchanged sentences

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.

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 stockholder , 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 stockholder s.

Upon closing of both the first and second tranche of the February 2022 Private Placement, Innoviva owned 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 80.1% 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.

As 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:

1 unchanged sentence

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.

the board of directors 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.

2 unchanged sentences

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.

8 unchanged sentences

The net operating loss carryforwards and other tax attributes of C3J may also be subject to limitations as a result of ownership changes.

On May 9, 2019, our predecessor company, C3J Therapeutics, Inc.

(“C3J”) completed a reverse merger with AmpliPhi Biosciences Corporation, a bacteriophage development company (“AmpliPhi”), where Ceres Merger Sub, Inc., a wholly owned subsidiary of AmpliPhi, merged with and into C3J (the “Merger”).

If a corporation undergoes an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended, such corporation’s net operating loss carryforwards and certain other tax attributes arising from before the ownership change are subject to limitations on use after the ownership change.

15 unchanged sentences

We are not able to predict the impact on the timing and costs of our planned clinical trials as a result of COVID-19.

We may not be able to obtain materials or supplies necessary to conduct clinical trials or to manufacture our product candidates in a timely manner, which could have an adverse impact on our results of operations and may delay development and commercialization of our product candidates.

We rely on third-party suppliers and manufacturers for many aspects of our manufacturing process development of our product candidates.

In some cases, due to the unique manner in which our products are manufactured, we rely on single source providers of raw materials and manufacturing supplies.

These third parties are independent entities subject to their own unique operational and financial risks that are outside of our control.

These third parties may not perform their obligations in a timely and cost-effective manner or in compliance with applicable regulations, and they may be unable or unwilling to increase production capacity commensurate with demand for our existing or future needs.

Finding alternative providers could take a significant amount of time and involve significant expense due to the specialized

nature of our product candidates.

The time and effort required to qualify a new supplier could result in additional costs, diversion of resources, or reduced manufacturing yields, any of which would negatively impact our operating results.

In addition, if deliveries of materials from our suppliers are interrupted for any reason, we may be unable to ship supply of our product candidates to support our clinical trials.

Furthermore, factors such as the COVID-19 pandemic, the conflict between Russia and Ukraine, weather events, labor or raw material shortages and other supply chain disruptions could result in difficulties and delays in development of our product candidates, which could also have an adverse impact on our results in operations.

Risks Related to Our Intellectual Property

9 unchanged sentences

Also, changes in either patent laws or in interpretations of patent laws may diminish the value of our intellectual property.

We are not able to guarantee that all of our patent applications will result in the issuance of patents and we cannot predict the breadth of claims that may be allowed in our patent applications or in the patent applications we may license from others.

We are not able to guarantee that all of our patent applications will result in the issuance of patents and cannot predict the breadth of claims that may be allowed in our patent applications or in the patent applications we may license from others.

Central provisions of The Leahy-Smith America Invents Act, or the America Invents Act went into effect on September 16, 2012 and on March 16, 2013.

1 unchanged sentence

These changes include provisions that affect the way patent applications are being filed, prosecuted and litigated.

For example, the America Invents Act enacted proceedings involving post-issuance patent review procedures, such as inter partes review (“IPR”), and post-grant review, that allow third parties to challenge the validity of an issued patent in front of the United States Patent and Trademark Office (“U.S.

PTO Patent Trial and Appeal Board.

14 unchanged sentences

PTO for review of an issued patent.

Thus, even where we have issued patents, our rights under those patents may be challenged and ultimately not provide us with sufficient protection against competitive products or processes.

Thus, even where we have issued patents,

our rights under those patents may be challenged and ultimately not provide us with sufficient protection against competitive products or processes.

The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage.

24 unchanged sentences

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.

16 unchanged sentences

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.

These competitors also compete with us to recruit and retain qualified scientific and management personnel, establish clinical trial sites and patient registration for clinical trials, as well as to acquire technologies and technology licenses complementary to our programs or advantageous to our business.

These competitors also compete with us to recruit and retain qualified scientific and management

personnel, establish clinical trial sites and patient registration for clinical trials, as well as to acquire technologies and technology licenses complementary to our programs or advantageous to our business.

Moreover, competitors that are able to achieve patent protection, obtain regulatory approvals and commence commercial sales of their products before we do, and competitors that have already done so, may enjoy a significant competitive advantage.

46 unchanged sentences

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

If Innoviva were to exercise the warrants held by them, they would hold approximately 80.1% of our issued and outstanding shares of common stock.

In addition, on January 10, 2023, we entered into, as borrower, a secured convertible credit and security agreement (the “Credit Agreement”) with Innoviva.

The Loan is mandatorily convertible into our common stock upon a qualified financing event, as defined in the Credit Agreement.

The Loan is also convertible into our common stock at any time prior to maturity at the option of Innoviva at a specified conversion price.

Innoviva’s large ownership stake may allow it to exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support, including amendments to our articles of incorporation, adoption of measures that could delay or prevent a change in control or impede a merger, takeover, or other business combination involving us, and approval of other major corporate transactions.

3 unchanged sentences

As of December 31, 2022, we had outstanding common warrants to purchase an aggregate of 20,549,338 shares of our common stock at a weighted-average exercise price of $3.71 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.

As of December 31, 2022, 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 3,352,803 shares of our common stock at a weighted-average exercise price of $5.32 per share.

2 unchanged sentences

The issuance of additional securities could also have an adverse effect on the market price of our common stock.

Conversion of our convertible notes will dilute the ownership interest of existing stockholders, or may otherwise depress the market price of our common stock.

On January 10, 2023, we entered into, as borrower, a secured convertible credit and security agreement (the “Credit Agreement”) with Innoviva SO, a wholly owned subsidiary of Innoviva, Inc., a principal stockholder of us, pursuant to which Innoviva provided us with the Loan described in more detail above.

The Credit Agreement provides that if a Qualified Financing, as defined in the Credit Agreement, occurs, the outstanding principal amount of, and all accrued and unpaid interest on, the Loan shall be converted into shares of our common stock at a price per share equal to a 15.0% discount to the lowest price per share for our common stock paid by investors in a Qualified Financing (which price paid by investors in a Qualified Financing may not be less than a 15.0% discount to the closing price of our common stock immediately prior to the consummation of a Qualified Financing event).

The Credit Agreement also requires us to file a registration statement for the resale of all securities issued to the lender in connection with any conversion under the Credit Agreement.

After the such registration tatement has been declared effective by the SEC, any outstanding Loan amount, including all accrued and unpaid interest thereon, may be converted at the lender’s option, into shares of our common stock at a price per share equal to the greater of book value

or market value per share of our common stock on the date immediately preceding the effective date of the Credit Agreement, which is $1.52 (as may be appropriately adjusted for any stock split, combination or similar act).

The conversion of some or all of the Loan will dilute the ownership interests of existing stockholders.

Any sales in the public market of the shares of our common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock.

In addition, the existence of the notes may encourage short selling by market participants because the anticipated conversion of the Loan into shares of our common stock could depress the market price of our common stock.

We have never paid dividends on our common stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future.

16 unchanged sentences

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.

We face 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.

1 unchanged sentence

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.

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.

18 unchanged sentences

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.

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

1 unchanged sentence

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business.

We currently have three securities analysts and may never obtain additional research coverage by other securities and industry analysts.

We currently have three securities analysts and may never obtain additional

research coverage by other securities and industry analysts.

If no additional securities or industry analysts commence coverage of our company, the trading price for our stock could be negatively impacted.

20 unchanged sentences

Provisions of Washington law and our current articles of incorporation and bylaws may discourage, delay or prevent a merger or acquisition that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares.

In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace or remove our board of directors.

In addition, these provisions may frustrate or prevent any attempts by our

stockholders to replace or remove our current management by making it more difficult for stockholders to replace or remove our Board of Directors.

These provisions include:

18 unchanged sentences

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.

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.

23 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors