What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2024-03-21 compared with 2023-03-16 · 337 added, 541 removed, 165 unchanged (84% of the section changed)

1 unchanged sentence

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.

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

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

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

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.

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 on Form 10-K.

Summary of Risk Factors

Our ability to execute on our business strategy is subject to a number of risks, which are discussed more fully below in this section.

You should carefully consider these risks before making an investment in our common stock.

These risks include, among others, the following:

Below is a summary of the principal factors that make an investment in our common Stock speculative or risky.

This summary does not address all of the risks that we face.

Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below and should be carefully considered, together with other information in this Annual Report on Form 10-K and our other filings with the SEC before making an investment decision regarding our common stock.

● 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 will need substantial additional financing to develop our product candidates and implement our operating plans, including to support one or more pivotal trials in 2025 and beyond.

If we fail to obtain additional financing, we may be delayed or unable to complete the development and commercialization of our product candidates ;

● 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 members of our Board of Directors;

● 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;

● 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.

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

● Results from preclinical studies and Phase 1 or 2 clinical trials of our product candidates or from single-patient expanded access treatments may not be predictive of the results of later stage clinical trials;

● 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.

● We are seeking to develop antibacterial agents using bacteriophage and synthetic phage technology, a novel approach, which makes it difficult to predict the time and cost of development.

No bacteriophage products have been approved in the United States or elsewhere.

● 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;

● We have not completed formulation development of our product candidates;

● Our product candidates must undergo rigorous clinical testing, such clinical testing may fail to demonstrate safety and efficacy and any of our product candidates could cause undesirable side effects, which would substantially delay or prevent regulatory approval or commercialization;

● 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;

● We are subject to significant regulatory approval requirements, which could delay, prevent or limit our ability to market our product candidates;

● Failure to comply with health and data protection laws and regulations could lead to government enforcement actions (which could include civil or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business;

● 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;

● We must manage a geographically dispersed organization;

● 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.

If we fail to adequately protect this intellectual property or if we otherwise do not have exclusivity for the marketing of our products, our ability to commercialize products could suffer;

● If we are sued for infringing intellectual property rights of third parties or if we are forced to engage in an interference proceeding, it will be costly and time-consuming, and an unfavorable outcome in that litigation or interference would have a material adverse effect on our business;

● If our competitors are able to develop and market products that are more effective, safer or more affordable than ours, or obtain marketing approval before we do, our commercial opportunities may be limited;

● There is a substantial risk of product liability claims in our business.

If we do not obtain sufficient liability insurance, a product liability claim could result in substantial liabilities;

● Even if we receive regulatory approval to market our product candidates, the market may not be receptive to our product candidates upon their commercial introduction, which would negatively affect our ability to achieve profitability;

● The uncertainty associated with pharmaceutical reimbursement and related matters may adversely affect our business;

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

● 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.

● Our business operations and current and future relationships with clinical site investigators, healthcare professionals, consultants, third-party payors, patient organizations, and customers will be subject to applicable healthcare regulatory laws, which could expose us to penalties.

● Innoviva, our principal stockholder, beneficially owns greater than 50% of our outstanding shares of common stock, which causes us to be deemed a “controlled company” under the rules of the New York Stock Exchange (the “NYSE”).

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

Risks Related to Our Financial Condition and Need for Additional Capital

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.

We will need substantial additional financing to develop our product candidates and implement our operating plans.

If we fail to obtain additional financing, we may be delayed or unable to complete the development and commercialization of our product candidates.

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.

1 unchanged sentence

As of December 31, 2023, we had unrestricted cash and cash equivalents of $13.5 million, and we have had recurring losses from operations and negative operating cash flows since inception.

In March 2024, we received an additional loan from Innoviva of $35.0 million.

Our outstanding loans mature in January 2025 and in June 2025.

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 and the recent disruptions to, and volatility in, financial markets in the United States and worldwide.

Our ability to raise additional capital via equity or debt financing 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.

1 unchanged sentence

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

On March 27, 2020, we completed a private placement (“2020 Private Placement”) transaction in which we sold to Innoviva a total of 8,710,800 newly issued shares of the Company’s common stock and warrants to purchase 8,710,800 shares of common stock, with an exercise price per share of $2.87.

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

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”).

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.

While we believe that our existing resources will be sufficient to fund our planned operations into fiscal year 2024, we cannot provide assurances that our estimates will be 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.

Our future funding requirements will depend on many factors, including:

7 unchanged sentences

● the costs of lawsuits involving us or our product candidates.

In addition, raising additional capital through the sale of securities could cause significant dilution to our stockholders.

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.

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.

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.

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;

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;

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;

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.

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.

As of December 31, 2022, our accumulated deficit was $239.8 million and we expect to incur losses for the foreseeable future.

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 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.

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 Annual Report.

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

Clinical trials and activities associated with discovery research are costly.

17 unchanged sentences

Our expenses could increase beyond expectations if we are required by the FDA, the European Medicines Agency (“EMA”), or other foreign regulatory authorities to perform clinical trials and other studies in addition to those that we currently anticipate.

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 members of our Board of Directors.

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.

The requirements of these rules and regulations increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and place strain on our personnel, systems and resources.

The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and financial condition.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.

Ensuring that we have adequate internal financial and accounting controls and procedures in place is a costly and time-consuming effort that needs to be re-evaluated frequently.

We currently do not have an internal audit group, and we may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge.

Implementing any appropriate changes to our internal controls may require specific compliance training for our directors, officers and employees, entail substantial costs to modify our existing accounting systems, and take a significant period of time to complete.

Such changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially impair our ability to operate our business.

Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent fraud.

In accordance with NYSE American rules, we are required to maintain a majority independent board of directors.

The various rules and regulations applicable to public companies make it more difficult and more expensive for us to maintain directors’ and officers’ liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to maintain coverage.

If we are unable to maintain adequate directors’ and officers’ insurance, our ability to recruit and retain qualified officers and directors will be significantly curtailed.

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.

We are required to maintain internal control over financial reporting adequate to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements in accordance with generally accepted accounting principles.

We do not expect that our internal control over financial reporting will prevent all errors and all fraud.

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.

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.

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.

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.

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.

As of December 31, 2023, our accumulated deficit was $308.8 million and we expect to incur losses for the foreseeable future.

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.

Additional information regarding our results of operations may be found in our consolidated financial statements included in Item 8 in the Annual Report and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 in this Annual Report.

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 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.

On June 15, 2020, we entered into an agreement with the Medical Technology Enterprise Consortium (“MTEC Agreement”), pursuant to which we received a $15.0 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 grant 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.

10 unchanged sentences

Risks Related to Our Business

We have limited operating history, have incurred significant operating losses since inception and expects to incur significant operating losses for the foreseeable future.

We may never become profitable or, if achieved, be able to sustain profitability.

To date, we have funded our operations primarily through private placement offerings of equity securities.

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

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.

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.

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

We need FDA approval prior to marketing our product candidates in the United States.

If we fail to obtain FDA approval to market our product candidates, we will be unable to sell our products in the United States, which will significantly impair our ability to generate any revenues.

This regulatory review and approval process, which includes evaluation of pre-clinical studies and clinical trials of our product candidates as well as the evaluation of our manufacturing processes, is lengthy, expensive and uncertain.

To receive approval, we must, among other things, demonstrate with substantial evidence from well-controlled clinical trials that our product candidates are both safe and effective for each indication for which approval is sought.

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 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.

In such event, our ability to generate revenues from such products would be greatly reduced and our business would be harmed.

The FDA has substantial discretion in the approval process and may either refuse to consider any of our applications for substantive review or may form the opinion after review of our data that one or more of our applications are insufficient to approve if we our product candidates.

If the FDA does not consider or approve any of our applications, it may require that we conduct additional clinical, pre-clinical or manufacturing validation studies and submit that data before it will reconsider our application.

Depending on the extent of these or any other studies, approval of any applications that we submit may be delayed by several years, or may require us to expend more resources than we have available.

It is also possible that additional studies, if performed and completed, may not be successful or considered sufficient by the FDA for approval or even to make our applications approvable.

If any of these outcomes occur, we may be forced to abandon one or more of our applications for approval, which might significantly harm our business and prospects.

It is possible that none of our products or any product we may seek to develop in the future will ever obtain the appropriate regulatory approvals necessary for us to commence product sales.

Any delay in obtaining, or an inability to obtain, applicable regulatory approvals would prevent us from commercializing our products, generating revenues and achieving and sustaining profitability.

We are seeking to develop antibacterial agents using bacteriophage and synthetic phage technology, a novel approach, which makes it difficult to predict the time and cost of development.

No bacteriophage products have been approved in the United States or elsewhere.

We are developing our product candidates with bacteriophage and synthetic phage technology.

We have not, nor to our knowledge has any other company, received regulatory approval from the FDA or equivalent foreign agencies for a pharmaceutical drug based on this approach.

While in vitro studies have characterized the behavior of bacteriophages in cell cultures and there exists a body of literature regarding the use of phage therapy in humans, the safety and efficacy of phage therapy in humans has not been extensively studied in well-controlled modern clinical trials.

Most of the prior research on phage-based therapy was conducted in the former Soviet Union prior to and immediately after World War II

and lacked appropriate control group design or lacked control groups at all.

Furthermore, the standard of care has changed substantially during the ensuing decades since those studies were performed, diminishing the relevance of prior claims of improved cure rates.

We cannot be certain that our approach will lead to the development of approvable or marketable drugs.

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.

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.

Results from preclinical studies and Phase 1 or 2 clinical trials of our product candidates or from single-patient expanded access treatments may not be predictive of the results of later stage clinical trials.

13 unchanged sentences

A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials, even after obtaining promising results in earlier clinical trials and most product candidates that commence clinical trials are never approved for commercial sale.

We are seeking to develop antibacterial agents using bacteriophage and synthetic phage technology, a novel approach, which makes it difficult to predict the time and cost of development.

No bacteriophage products have been approved in the United States or elsewhere.

We are developing our product candidates with bacteriophage and synthetic phage technology.

We have not, nor to our knowledge has any other company, received regulatory approval from the FDA or equivalent foreign agencies for a pharmaceutical drug based on this approach.

Most of the prior research on phage-based therapy was conducted in the former Soviet Union prior to and immediately after World War II and lacked appropriate control group design or lacked control groups at all.

Furthermore, the standard of care has changed substantially during the ensuing decades since those studies were performed, diminishing the relevance of prior claims of improved cure rates.

We cannot be certain that our approach will lead to the development of approvable or marketable drugs.

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

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

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.

product candidates.

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

9 unchanged sentences

● 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 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.

If we do not successfully commence or complete our clinical trials on schedule, the price of our common stock may decline.

Completion of clinical trials depends, among other things, on our ability to enroll a sufficient number of patients, which is a function of many factors, including:

5 unchanged sentences

● our ability to obtain and maintain patient consents;

● delays or difficulties in enrolling patients in our clinical trials as a result of impacts associated with the COVID-19 pandemic;

● competition for patients from clinical trials for other treatments.

We may experience difficulties in enrolling patients in our clinical trials, which could increase the costs or affect the timing or outcome of these clinical trials.

Difficulties in enrolling patients in our clinical trials, could increase the costs or affect the timing or outcome of these clinical trials.

This is particularly true with respect to diseases with relatively small patient populations.

We have not completed formulation development of our product candidates.

The development of our bacteriophage product candidates requires that we isolate, select and combine a number of bacteriophages that target the desired bacteria for that product candidate.

The selection of bacteriophages for any of our product candidates is based on a variety of factors, including without limitation the ability of the selected phages, in combination, to successfully kill the targeted bacteria, the degree of cross-reactivity of the individual phages with the same part of the bacterial targets, the ability of the combined phages to satisfy regulatory requirements, our ability to manufacture sufficient quantities of the phages, intellectual property rights of third parties, and other factors.

While we have selected initial formulations of AP-SA02 for the treatment of S.

aureus infections, and the initial formulations of AP-PA02 for the treatment of P.

aeruginosa infections in CF patients.

There can be no assurance that these initial formulations will be the final formulations of AP-SA02 or AP-PA02 for commercialization if approved.

If we are unable to complete formulation development of our product candidates in the time frame that we have anticipated, then our product development timelines, and the regulatory approval of our product candidates, could be delayed.

Our product candidates must undergo rigorous clinical testing, such clinical testing may fail to demonstrate safety and efficacy and any of our product candidates could cause undesirable side effects, which would substantially delay or prevent regulatory approval or commercialization.

Before we can obtain regulatory approval for a product candidate, we must undertake extensive clinical testing in humans to demonstrate safety and efficacy to the satisfaction of the FDA or other regulatory agencies.

Clinical trials of new drug candidates sufficient to obtain regulatory marketing approval are expensive and take years to complete.

We cannot be certain of successfully completing clinical testing within the time frame we have planned, or at all.

We may experience numerous unforeseen events during, or as a result of, the clinical trial process that could delay or prevent us from receiving regulatory approval or commercializing our product candidates, including the following:

● our clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical and/or preclinical testing or to abandon programs;

● the results obtained in earlier stage clinical testing may not be indicative of results in future clinical trials;

● clinical trial results may not meet the level of statistical significance required by the FDA or other regulatory agencies;

● we, or regulators, may suspend or terminate our clinical trials if the participating patients are being exposed to unacceptable health risks;

● our product candidates may have unintended or undesirable effects on patients that may delay or preclude regulatory approval of our product candidates or limit their commercial use, if approved.

If we do not successfully commence or complete our clinical trials on schedule, the price of our common stock may decline.

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.

We are developing novel manufacturing processes for our product candidates at our facility in Marina Del Rey (near Los Angeles), California.

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.

We are developing novel manufacturing processes for our product candidates at our current facility in Marina Del Rey, California.

We are constructing the new manufacturing facility in Los Angeles, California and plan to move manufacturing processes to this new facility in the second half of 2024.

The manufacturing processes for our product candidates, and the scale-up of such processes for clinical trials, are 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.

4 unchanged sentences

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

In the event our facility in Marina Del Rey does not receive a satisfactory cGMP inspection for the manufacture of our product candidates, we may need to fund additional modifications to our manufacturing process, conduct additional validation studies, or find alternative manufacturing facilities, any of which would result in significant cost to us as well as a delay of up to several years in obtaining approval for such product candidate.

In the event our facility in Los Angeles, California, does not receive a satisfactory cGMP inspection for the manufacture of our product candidates, we may need to fund additional modifications to our manufacturing process, conduct additional validation studies, or find alternative manufacturing facilities, any of which would result in significant cost to us as well as a delay of up to several years in obtaining approval for such product candidate.

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

3 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.

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

We need FDA approval prior to marketing our product candidates in the United States.

If we fail to obtain FDA approval to market our product candidates, we will be unable to sell our products in the United States, which will significantly impair our ability to generate any revenues.

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.

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.

In such event, our ability to generate revenues from such products would be greatly reduced and our business would be harmed.

Depending on the extent of these or any other studies, approval of any applications that we submit may be delayed by several years, or may require us to expend more resources than we have available.

It is also possible that additional studies, if performed and completed, may not be successful or considered sufficient by the FDA for approval or even to make our applications approvable.

If any of these outcomes occur, we may be forced to abandon one or more of our applications for approval, which might significantly harm our business and prospects.

It is possible that none of our products or any product we may seek to develop in the future will ever obtain the appropriate regulatory approvals necessary for us to commence product sales.

Any delay in obtaining, or an inability to obtain, applicable regulatory approvals would prevent us from commercializing our products, generating revenues and achieving and sustaining profitability.

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.

3 unchanged sentences

The study population must also adequately represent the U.S.

population, and the data must be applicable to the U.S.

population and U.S.

population, and the data must be applicable to the United States population and U.S.

medical practice in ways that the FDA deems clinically meaningful.

4 unchanged sentences

Further, with respect to AP-SA01, we have changed the product formulation to AP-SA02 and any work related to AP-SA01 may not be relevant to the FDA or other international regulatory authorities.

We may need to license additional intellectual property rights.

The development and commercialization of phage-based antibacterial agents may require us to obtain rights to intellectual property from third parties.

We may also determine that it is necessary or advisable to license other intellectual property from third parties.

There can be no assurance that such intellectual property rights would be available on commercially reasonable terms, if at all.

We are subject to significant regulatory approval requirements, which could delay, prevent or limit our ability to market our product candidates.

13 unchanged sentences

Failure to comply with applicable regulatory requirements may, among other things, result in fines, suspensions of regulatory approvals, product recalls, product seizures, operating restrictions and criminal prosecution.

Failure to comply with health and data protection laws and regulations could lead to government enforcement actions (which could include civil or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business.

We and any potential collaborators may be subject to federal, state and foreign data protection laws and regulations (i.e., laws and regulations that address privacy and data security).

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 HIPAA.

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.

International data protection laws, including Regulation 2016/679, known as the General Data Protection Regulation (“GDPR”) may also apply to health-related and other personal information obtained outside of the United States.

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 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).

In addition, the GDPR includes restrictions on cross-border data transfer.

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.

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 (“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.

Compliance with U.S.

and international data protection laws and regulations could require us to take on more onerous obligations in our contracts, restrict our ability to collect, use and disclose data, or in some cases, impact our ability to operate in certain jurisdictions.

Failure to comply with U.S.

and international data protection laws and regulations could result in government enforcement actions (which could include civil or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business.

Moreover, clinical trial subjects about whom we or our potential collaborators obtain information, as well as the providers who share this information with us, may contractually limit our ability to use and disclose the information.

Claims that we have violated individuals’ privacy rights, failed to comply with data protection laws, or breached our contractual obligations, even if we are not found liable, could be expensive and time consuming to defend and could result in adverse publicity that could harm our business.

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

In addition to our U.S.

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

● compliance with differing or unexpected regulatory requirements for the development, manufacture and, if approved, commercialization of our product candidates;

● difficulties in staffing and managing foreign operations;

● foreign government taxes, regulations and permit requirements;

and foreign government tariffs, trade restrictions, price and exchange controls and other regulatory requirements;

● anti-corruption laws, including the Foreign Corrupt Practices Act;

● economic weakness, including inflation, natural disasters, war, events of terrorism or political instability in particular foreign countries;

● fluctuations in currency exchange rates, which could result in increased operating expenses and reduced revenues, and other obligations related to doing business in another country;

● compliance with tax, employment, immigration and labor laws, regulations and restrictions for employees living or traveling abroad;

● workforce uncertainty in countries where labor unrest is more common than in the United States;

● production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;

● changes in diplomatic and trade relationships;

● challenges in enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States.

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, 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.

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 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.

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:

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 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.

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.

Competition for qualified personnel in the biotechnology field is intense.

We face competition for personnel from other biotechnology and pharmaceutical companies, universities, public and private research institutions and other organizations.

We also face competition from other more well-funded and well-established businesses, and we may also be viewed as a riskier choice from a job stability perspective due to our relative newer status than longer existing biotech and pharmaceutical companies.

If we are unable to attract and retain key personnel and advisors, it may negatively affect our ability to successfully develop, test, commercialize and market our products and product candidates.

We must manage a geographically dispersed organization.

While we are a small company, we currently have operations in the United States and Australia.

In the future, we may also locate facilities in other locations based on proximity to personnel with the expertise needed to research, develop and manufacture phage-based therapeutics, costs of operations or other factors.

Managing our organization across multiple locations and multiple time zones may reduce our efficiency, increase our expenses and increase the risk of operational difficulties in the execution of our plans.

Because the Merger resulted in an ownership change under Section 382 of the Internal Revenue Code for Armata, Armata’s pre-Merger net operating loss carryforwards and certain other tax attributes will be subject to limitations.

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.

In general, an ownership change occurs if there is a cumulative change in the corporation’s equity ownership by certain stockholders that exceeds fifty percentage points over a rolling three-year period.

Similar rules may apply under state tax laws.

The Merger resulted in an ownership change for AmpliPhi and, accordingly, AmpliPhi’s net operating loss carryforwards and certain other tax attributes may be subject to limitations (or disallowance) on their use after the Merger.

C3J’s net operating loss carryforwards may also be subject to limitation as a result of prior shifts in equity ownership and/or the Merger.

Additional ownership changes in the future could result in additional limitations on our net operating loss carryforwards.

Consequently, even if we achieve profitability, we may not be able to utilize a material portion of our net operating loss carryforwards and other tax attributes, which could have a material adverse effect on cash flow and results of operations.

As of December 31, 2022, we had federal net operating loss carryforwards of approximately $145 million.

Risks Related to Our Reliance on Third Parties

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 use third parties, such as clinical research organizations, to assist in conducting our clinical trials.

We rely on third parties to conduct our clinical trials and to obtain materials or supplies necessary to conduct trials or to manufacture our product candidates, and their failure to perform their obligations in a timely or competent manner may delay development and commercialization of our product candidates.

We use third parties, such as clinical research organizations, to assist in conducting our clinical trials and for many aspects of our manufacturing process development of our product candidates.

However, we may face delays outside of our control if these parties do not perform their obligations in a timely or competent fashion or if we are forced to change service providers.

2 unchanged sentences

If we experience significant delays in the progress of our clinical trials and in our plans to submit Biologics License Applications, the commercial prospects for product candidates could be harmed and our ability to generate product revenue would be delayed or prevented.

Our clinical research operations could also be negatively impacted by delays resulting from the COVID-19 pandemic.

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.

Our business operations and current and future relationships with clinical site investigators, healthcare professionals, consultants, third-party payors, patient organizations, and customers will be subject to applicable healthcare regulatory laws, which could expose us to penalties .

Our business operations and current and future arrangements with clinical site investigators, healthcare professionals, consultants, third-party payors, patient organizations, and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations.

These laws may constrain the business or financial arrangements and relationships through which we conduct our operations, including how we market, sell, and distribute our product candidates, if approved.

Such laws include, but are not limited to, the U.S.

Anti-Kickback Statute, U.S.

civil and criminal false claims laws, the U.S.

federal Beneficiary Inducement Statute, HIPAA, and state and local laws and regulations.

Some of these laws may apply differently to, and may have different requirements for, and effects on, our business, rendering compliance complex and possibly burdensome.

We cannot predict how future changes to these laws may impact our business.

Ensuring that our internal operations and future business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs.

It is possible that governmental authorities will conclude that our business practices, including our relationships with physicians and other healthcare providers, may not comply with current or future statutes, regulations, agency guidance, or case law involving applicable fraud and abuse or other healthcare laws and regulations.

If our operations are found to be in violation of any of the laws described above or any other governmental laws and regulations that may apply to us, we may be subject to significant penalties, including civil, criminal, and administrative penalties;

exclusion from government-funded healthcare programs, such as Medicare and Medicaid or similar programs in other jurisdictions;

integrity oversight and reporting obligations to resolve allegations of non-compliance;

disgorgement;

individual imprisonment;

contractual damages;

reputational harm;

diminished profits;

and the curtailment or restructuring of our operations.

If any of the physicians or other providers or entities with whom we expect to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil, or administrative sanctions, including exclusions from government-funded healthcare programs and imprisonment, which could affect our ability to operate our business.

Furthermore, defending against any of these actions can be costly, time-consuming, and may require significant personnel resources.

Therefore, even if we are successful in defending against any actions that may be brought against us, our business may be impaired.

We face potential liability related to the privacy of health information we may obtain from the patients in our clinical trials if we fail to comply with privacy laws.

Most healthcare providers are subject to privacy and security regulations promulgated under HIPAA, as amended by HITECH.

We are not currently classified as a covered entity or business associate under HIPAA and thus are not subject to its requirements or penalties.

However, any person may be prosecuted under HIPAA’s criminal provisions either directly or under aiding-and-abetting or conspiracy principles.

Consequently, depending on the facts and circumstances, we could face substantial criminal penalties if we knowingly receive individually identifiable health information from a HIPAA-covered healthcare provider or research institution that has not satisfied HIPAA’s requirements for disclosure of individually identifiable health information.

In addition, if we receive sensitive personally identifiable information, including health information, we may be subject to state laws requiring notification of affected individuals and state regulators if a breach of personal information occurs, which is a broader class of information than the health information protected by HIPAA.

We cannot assure you that we, our CROs, our clinical trial sites, and our clinical trial principal investigators with access to personally identifiable and other sensitive or confidential information relating to the patients in our clinical trials will not breach contractual obligations, or that we or they will not experience data security breaches or attempts thereof.

This could have a corresponding effect on our business, including putting us in breach of our obligations under privacy laws and regulations as discussed above, which could in turn adversely affect our business, financial condition, results of operations, and prospects.

We cannot assure you that our contractual measures and our own privacy and security-related safeguards will protect us from the risks associated with the third-party processing, storage, and transmission of such information.

Compliance with global privacy and data security requirements could result in additional costs and liabilities to us or inhibit our ability to collect and process data globally, and the failure to comply with such requirements could subject us to significant fines and penalties, which could have a material adverse effect on our business, financial condition, results of operations, or prospects.

The regulatory framework for the collection, use, safeguarding, sharing, transfer, and other processing of information worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future.

Globally, many jurisdictions have established their own data security and privacy frameworks.

In the United States, there are a broad variety of data protection laws that are either currently in place or under way and a wide range of enforcement agencies at both the state and federal levels have the authority to review companies for privacy and data security concerns based on general consumer protection laws.

The Federal Trade Commission (“FTC”), and state Attorneys General have been aggressive in reviewing privacy and data security protections for consumers.

New laws also are being considered at both the state and federal levels.

For example, the California Consumer Privacy Act (the “CCPA”), which went into effect on January 1, 2020, provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.

Many other states are considering similar legislation.

A broad range of legislative measures also have been introduced at the federal level.

There also is the threat of consumer class actions related to these laws and the overall protection of personal data.

Additionally, the CCPA was amended by the California Privacy Rights Act, which significantly amends the CCPA and imposes additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data.

It will also create a new California data protection agency authorized to issue substantive regulations, which could result in increased privacy and information security enforcement.

The majority of the provisions went into effect on January 1, 2023, and additional compliance investment and potential business process changes may be required.

Similar laws have passed in, or are being considered by, other states.

The enactment of such laws in other states could result in potentially conflicting requirements, which would make compliance challenging and costly.

The FTC and many state attorneys general continue to enforce federal and state consumer protection laws against companies for online collection, use, dissemination and security practices that appear to be unfair or deceptive.

For example, according to the FTC, failing to take appropriate steps to keep consumers’ personal information secure can constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission

The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.

We may also be subject to new state laws governing the privacy of consumer health data, including information concerning individual health conditions and treatment.

The data privacy laws in the European Union (the “EU”) have also been significantly reformed.

The collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the EU, including personal health data, is subject to the General Data Protection Regulation, (EU) 2016/679 (the “GDPR”).

The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when engaging third-party processors.

The GDPR has expanded the definition of personal data to include coded data and requiring changes to informed consent practices and more detailed notices for clinical trial patients and investigators.

In addition, the GDPR also imposes strict rules on the transfer of personal data to countries outside the EU, including the United States and, as a result, increases the scrutiny that clinical trial sites located in the European Economic Area should apply to transfers of personal data from such sites to countries that are considered to lack an adequate level of data protection, such as the United States.

The GDPR also permits data protection authorities to require destruction of improperly gathered or used personal information or impose substantial fines for violations of the GDPR, which can be up to 4% of global revenues or €20 million, whichever is greater, and it also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR.

In addition, the GDPR provides that EU member states may make their own additional laws and regulations limiting the processing of personal data, including genetic, biometric, or health data.

Furthermore, since the United Kingdom is no longer part of the EU, its data protection regulatory regime will be independent of the EU.

From January 1, 2021, companies have had to comply with the GDPR and also the United Kingdom GDPR, which, together with the amended United Kingdom Data Protection Act 2018, retains the GDPR in UK national law.

The relationship between the United Kingdom and the EU in relation to certain aspects of data protection law remains unclear.

In addition, the longer term economic, legal, political, regulatory, and social framework to be put in place between the United Kingdom and the EU has had, and may continue to have, a material and adverse effect on global economic conditions and the stability of global financial markets and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets.

Any of these factors could depress economic activity and restrict our access to capital, which could materially and adversely affect our business, financial condition, and results of operations.

Risks Related to Our Intellectual Property

We are dependent on patents and proprietary technology.

If we fail to adequately protect this intellectual property or if we otherwise do not have exclusivity for the marketing of our products, our ability to commercialize products could suffer.

Our commercial success will depend in part on our ability to obtain and maintain patent protection sufficient to prevent others from marketing our product candidates, as well as to defend and enforce these patents against infringement and to operate without infringing the proprietary rights of others.

Protection of our product candidates from unauthorized use by third parties will depend on having valid and enforceable patents cover our product candidates or their manufacture or use, or having effective trade secret protection.

If our patent applications do not result in issued patents, or if our patents are found to be invalid, we will lose the ability to exclude others from making, using or selling the inventions claimed therein.

We have a limited number of patents and pending patent applications.

The patent positions of biotechnology companies can be uncertain and involve complex legal and factual questions.

This is due to inconsistent application of policy and changes in policy relating to examination and enforcement of biotechnology patents to date on a global scale.

The laws of some countries may not protect intellectual property rights to the same extent as the laws of countries having well-established patent systems, and those countries may lack adequate rules and procedures for defending our intellectual property rights.

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 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.

The America Invents Act includes a number of significant changes to U.S.

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 U.S.

PTO Patent Trial and Appeal Board.

Each proceeding has different eligibility criteria and different patentability challenges that can be raised.

IPRs permit any person (except a party who has been litigating the patent for more than a year) to challenge the validity of the patent on the grounds that it was anticipated or made obvious by prior art.

Patents covering pharmaceutical products have been subject to attack in IPRs from generic drug companies and from hedge funds.

If it is within six months of the issuance of the challenged patent, a third party can petition the U.S.

PTO for post-grant review, which can be based on any invalidity grounds and is not limited to prior art patents or printed publications.

In post-issuance proceedings, U.S.

PTO rules and regulations generally tend to favor patent challengers over patent owners.

For example, unlike in district court litigation, claims challenged in post-issuance proceedings are given their broadest reasonable meaning, which increases the chance a claim might be invalidated by prior art or lack support in the patent specification.

As another example, unlike in district court litigation, there is no presumption of validity for an issued patent, and thus, a challenger’s burden to prove invalidity is by a preponderance of the evidence, as opposed to the heightened clear and convincing evidence standard.

As a result of these rules and others, statistics released by the U.S.

PTO show a high percentage of claims being invalidated in post-issuance proceedings.

Moreover, with few exceptions, there is no standing requirement to petition the U.S.

PTO for inter partes review or post-grant review.

In other words, companies that have not been charged with infringement or that lack commercial interest in the patented subject matter can still petition the U.S.

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.

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.

● we might not be the first to file patent applications for our inventions;

● others may independently develop similar or alternative product candidates to any of our product candidates that fall outside the scope of our patents;

● our pending patent applications may not result in issued patents;

● our issued patents may not provide a basis for commercially viable products or may not provide us with any competitive advantages or may be challenged by third parties;

● others may design around our patent claims to produce competitive products that fall outside the scope of our patents;

● we may not develop additional patentable proprietary technologies related to our product candidates;

● we are dependent upon the diligence of our appointed agents in national jurisdictions, acting for and on our behalf, which control the prosecution of pending domestic and foreign patent applications and maintain granted domestic and foreign patents.

An issued patent does not guarantee us the right to practice the patented technology or commercialize the patented product.

Third parties may have blocking patents that could be used to prevent us from commercializing our patented products and practicing our patented technology.

Our issued patents and those that may be issued in the future may be challenged, invalidated or circumvented, which could limit our ability to prevent competitors from marketing the same or related product candidates or could limit the length of the term of patent protection of our product candidates.

Moreover, because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that, before any of our product candidates can be commercialized, any related patent may expire or remain in force for only a short period following commercialization, thereby reducing any advantage of the patent.

Patent term extensions may not be available for these patents.

We rely on trade secrets and other forms of non-patent intellectual property protection.

If we are unable to protect our trade secrets, other companies may be able to compete more effectively against us.

We rely on trade secrets to protect certain aspects of our technology, including our proprietary processes for manufacturing and purifying bacteriophages.

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.

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.

In addition, courts outside the United States may be less willing to or may not protect trade secrets.

If we are unable to obtain and maintain patent protection for our technology and product candidates, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technology and drugs similar or identical to ours, and our ability to successfully commercialize our technology and product candidates may be adversely affected.

Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our product candidates.

We seek to protect our proprietary position by filing patent applications in the United States and abroad related to our technology and product candidates.

If we do not adequately protect our intellectual property, competitors may be able to use our technologies and erode or negate any competitive advantage that we may have, which could harm our business and ability to achieve profitability.

To protect our proprietary positions, we file patent applications in the United States and abroad related to our novel technologies and product candidates that are important to our business.

The patent application and prosecution process is expensive and time-consuming.

We, our current licensees, or any future licensors and licensees may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.

We or our current licensees, or any future licensors or licensees may also fail to identify patentable aspects of our research and development before it is too late to obtain patent protection.

Therefore, these and any of our patents and applications may not be prosecuted and enforced in a manner consistent with our best interests.

It is possible that defects of form in the preparation or filing of our patents or patent applications may exist, or may arise in the future, such as with respect to proper priority claims, inventorship, claim scope or patent term adjustments.

If our current licensees, or any future licensors or licensees, are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised, and we might not be able to prevent third parties from making, using and selling competing products.

If there are material defects in the form or preparation of our patents or patent applications, such patents or applications may be invalid and/or unenforceable.

Moreover, our competitors may independently develop equivalent knowledge, methods and know-how.

If we are sued for infringing intellectual property rights of third parties or if we are forced to engage in an interference proceeding, it will be costly and time-consuming, and an unfavorable outcome in that litigation or interference would have a material adverse effect on our business.

Our ability to commercialize our product candidates depends on our ability to develop, manufacture, market and sell our product candidates without infringing the proprietary rights of third parties.

Numerous United States and foreign patents and patent applications, which are owned by third parties, exist in the general field of anti-infective products or in fields that otherwise may relate to our product candidates.

If we are shown to infringe, we could be enjoined from use or sale of the claimed invention if we are unable to prove that the patent is invalid.

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.

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.

For so long as our product candidates are in clinical trials, we believe our clinical activities fall within the scope of the exemptions provided by 35 U.S.C.

Section 271(e) in the United States, which exempts from patent infringement liability activities reasonably related to the development and submission of information to the FDA.

As our clinical investigational drug product candidates progress toward commercialization, the possibility of a patent infringement claim against us increases.

While we attempt to ensure that our active clinical investigational drugs and the methods we employ to manufacture them, as well as the methods for their use we intend to promote, do not infringe other parties’ patents and other proprietary rights, we cannot be certain they do not, and competitors or other parties may assert that we infringe their proprietary rights in any event.

We may be exposed to future litigation based on claims that our product candidates, or the methods we employ to manufacture them, or the uses for which we intend to promote them, infringe the intellectual property rights of others.

Our ability to manufacture and commercialize our product candidates may depend on our ability to demonstrate that the manufacturing processes we employ and the use of our product candidates do not infringe third-party patents.

If third-party patents were found to cover our product candidates or their use or manufacture, we could be required to pay damages or be enjoined and therefore unable to commercialize our product candidates, unless we obtained a license.

A license may not be available to us on acceptable terms, if at all.

Any of these outcomes could impair our ability to prevent competition from third parties.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain.

Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow the scope of our patent protection.

In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States.

No consistent policy regarding the breadth of claims allowed in biotechnology and pharmaceutical patents has emerged to date in the United States or in many foreign jurisdictions.

For example, European patent law currently restricts the patentability of methods of treatment of the human body more than United States law does.

In addition, the determination of patent rights with respect to pharmaceutical compounds and technologies commonly involves complex legal and factual questions, which has in recent years been the subject of much litigation.

As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain.

Furthermore, recent changes in patent laws in the United States, including the America Invents Act of 2011, may affect the scope, strength and enforceability of our patent rights or the nature of proceedings that may be brought by us related to our patent rights.

We may not be aware of all third-party intellectual property rights potentially relating to our current and future product candidates.

Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all.

Therefore, we cannot be certain that we were the first to make the inventions claimed in our patents or pending patent applications, or that we were the first to file for patent protection of such inventions.

Similarly, should we own any patents or patent applications in the future, we may not be certain that we were the first to file for patent protection for the inventions claimed in such patents or patent applications.

As a result, the issuance, scope, validity and commercial value of our patent rights cannot be predicted with any certainty.

Moreover, we may be subject to a third-party pre-issuance submission of prior art to the U.S.

Patent and Trademark Office, or USPTO, or become involved in derivation, ex-parte reexamination, or inter partes review proceedings in the USPTO or similar proceedings elsewhere, challenging our patent rights or the patent rights of others.

An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or product candidates and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights.

If the breadth or strength of protection provided by our patents and patent applications is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.

Our pending and future patent applications may not result in patents being issued that protect our technology or product candidates, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products.

Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection against competing products or processes sufficient to achieve our business objectives, prevent competitors from competing with us or otherwise provide us with any competitive advantage.

Our competitors may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner.

Our competitors may seek to market generic versions of any approved products by submitting abbreviated new drug applications to the FDA in which they claim that patents owned or licensed by us are invalid, unenforceable and/or not infringed.

Alternatively, our competitors may seek approval to market their own products similar to or otherwise competitive with our products.

In these circumstances, we may need to defend and/or assert our patents, including by filing lawsuits alleging patent infringement.

In any of these types of proceedings, a court or other agency with jurisdiction may find our patents invalid and/or unenforceable.

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad.

Such challenges may

result in loss of exclusivity or freedom to operate, a patent being held unenforceable, and/or in one or more patent claims being narrowed or invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and products.

Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could significantly harm our business.

There is a substantial amount of intellectual property litigation in the biotechnology and pharmaceutical industries, and we may become party to, or threatened with, litigation or other adversarial proceedings regarding intellectual property rights with respect to our technology or product candidates, including interference proceedings before the USPTO.

Intellectual property disputes arise in several areas including with respect to patents, use of other proprietary rights and the contractual terms of license arrangements.

Third parties may assert claims against us based on existing or future intellectual property rights.

The outcome of intellectual property litigation is subject to uncertainties that cannot be adequately quantified in advance.

If we are found to infringe a third-party’s intellectual property rights, we could be forced, including by court order, to cease developing, manufacturing or commercializing the infringing product candidate or product.

Alternatively, we may be required to obtain a license from such third party to use the infringing technology and continue developing, manufacturing or marketing the infringing product candidate.

However, we may not be able to obtain any required license on commercially reasonable terms or at all.

Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us.

In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent.

A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations.

Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar negative effect on our business.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States could be less extensive than those in the United States.

In some cases, we may not be able to obtain patent protection for certain licensed technology outside the United States.

In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States, even in jurisdictions where we do pursue patent protection.

Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, even in jurisdictions where we do pursue patent protection or from selling or importing products made using our inventions in and into the United States or other jurisdictions.

Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions.

Competitors may use our technologies in jurisdictions where we have not pursued and obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States.

These products may compete with our product candidates and preclinical programs and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions.

The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology products, which could make it difficult for us to stop the infringement of our patents, if pursued and obtained, or marketing of competing products in violation of our proprietary rights generally.

Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us.

We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful.

Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

In addition to seeking patent and trademark protection for our product candidates, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position.

We seek to protect our trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties prior to beginning research or disclosing proprietary information.

We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants.

Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets.

Despite these efforts and the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information due to our reliance on third parties, increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements.

Monitoring unauthorized uses and disclosures of our intellectual property is difficult, and we do not know whether the steps we have taken to protect our intellectual property will be effective.

In addition, we may not be able to obtain adequate remedies for any such breaches.

Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable.

In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets.

Moreover, our competitors may independently develop knowledge, methods and know-how equivalent to our trade secrets.

Competitors could purchase our products and replicate some or all the competitive advantages we derive from our development efforts for technologies on which we do not have patent protection.

If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us.

If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.

Risks Related to Our Industry

If our competitors are able to develop and market products that are more effective, safer or more affordable than ours, or obtain marketing approval before we do, our commercial opportunities may be limited.

Competition in the biotechnology and pharmaceutical industries is intense and continues to increase.

Some companies that are larger and have significantly more resources than we do are aggressively pursuing antibacterial development programs, including traditional therapies and therapies with novel mechanisms of action.

In addition, other companies are developing phage-based products for non-therapeutic uses and may elect to use their expertise in phage development and manufacturing to try to develop products that would compete with ours.

We also face potential competition from academic institutions, government agencies and private and public research institutions engaged in the discovery and development of drugs and therapies.

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.

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.

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.

The Generating Antibiotics Incentives Now Act is intended to provide incentives for the development of new, qualified infectious disease products.

These incentives may result in more competition in the market for new antibiotics and may cause pharmaceutical and biotechnology companies with more resources than we have to shift their efforts towards the development of products that could be competitive with our product candidates.

There is a substantial risk of product liability claims in our business.

If we do not obtain sufficient liability insurance, a product liability claim could result in substantial liabilities.

Our business exposes us to significant potential product liability risks that are inherent in the development, manufacturing and marketing of human therapeutic products.

Regardless of merit or eventual outcome, product liability claims may result in:

● delay or failure to complete our clinical trials;

We face substantial competition, which may result in others discovering, developing, or commercializing products before or more successfully than we do.

The development and commercialization of new drug products is highly competitive.

We face competition from major multi-national pharmaceutical companies, biotechnology companies, specialty pharmaceutical companies and generic drug companies with respect to our current and future product candidates.

There are several large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of product candidates for the treatment of drug-resistant infections.

Potential competitors also include academic institutions, government agencies and other public and private research organizations.

Our competitors may succeed in developing, acquiring or licensing technologies and drug products that are more effective, more effectively marketed and sold or less costly than our product candidates, which could render our product candidates non-competitive and obsolete.

If our competitors obtain marketing approval from the FDA, the EMA or other comparable regulatory authorities for their product candidates more rapidly than we do, it could result in our competitors establishing a strong market position before we are able to enter the market.

Regulation of generic and biosimilar products varies around the world and such regulation is complex and subject to ongoing interpretation and implementation by regulatory agencies and courts.

Particularly for biosimilars, health authority guidelines and legislative actions could make it less burdensome for competitor products to enter the market and further incentivize uptake of biosimilars.

In the United States, the FDA has issued several “interchangeability” designations for biosimilar products, and is expected to continue doing so in the future.

These designations could – subject to state law requirements – enable pharmacies to substitute biosimilars for innovator biological products.

the importance of biologic products to our clinical-stage pipeline, such regulation could have a material adverse effect on our business.

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

Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors.

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

These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

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

Our competitors also may obtain approval from the FDA, the EMA or other comparable regulatory agencies for their product candidates more rapidly than we may obtain approval for ours, which could result in product approval delays if a competitor obtains market exclusivity from the FDA or the EMA, or our competitors establish a strong market position before we are able to enter the market.

In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic drugs.

Additional drugs may become available on a generic basis over the coming years.

If our product candidates achieve marketing approval, we expect that they will be priced at a significant premium over competitive generic drugs.

Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.

We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and will face an even greater risk if we commercially sell any drugs that we may develop.

If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we will incur substantial liabilities.

Regardless of merit or eventual outcome, liability claims may result in:

● reduced resources of our management to pursue our business strategy;

● decreased demand for any product candidates or products that we may develop;

● injury to our reputation and significant negative media attention;

● withdrawal of clinical trial participants;

● decreased demand for our product candidates;

● injury to our reputation;

● litigation costs;

● substantial monetary awards against us;

● diversion of management or other resources from key aspects of our operations.

If we succeed in marketing products, product liability claims could result in an FDA investigation of the safety or efficacy of our products, our manufacturing processes and facilities or our marketing programs.

An FDA investigation could also potentially lead to a recall of our products or more serious enforcement actions, or limitations on the indications, for which they may be used, or suspension or withdrawal of approval.

We have product liability insurance that covers our clinical trials up to a $10.0 million annual per claim and aggregate limit.

We intend to expand our insurance coverage to include the sale of commercial products if marketing approval is obtained for our product candidates or any other compound that we may develop.

However, insurance coverage is expensive and we may not be able to maintain insurance coverage at a reasonable cost or at all, and the insurance coverage that we obtain may not be adequate to cover potential claims or losses.

● initiation of investigations by regulators;

● product recalls, withdrawals or labeling, marketing or promotional restrictions;

● significant costs to defend the resulting litigation;

● substantial monetary awards paid to clinical trial participants or patients;

● loss of revenue;

● the inability to commercialize any drugs that we may develop.

We currently hold product liability insurance coverage in an amount that may not be adequate to cover all liabilities that we may incur.

We may need to increase our insurance coverage as we expand our clinical trials or if we commence commercialization of our product candidates.

Insurance coverage is increasingly expensive.

We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.

Even if we receive regulatory approval to market our product candidates, the market may not be receptive to our product candidates upon their commercial introduction, which would negatively affect our ability to achieve profitability.

9 unchanged sentences

If our product candidates receive regulatory approval but do not achieve an adequate level of acceptance by physicians, healthcare payors and patients, we may not generate product revenues sufficient to attain profitability.

The uncertainty associated with pharmaceutical reimbursement and related matters may adversely affect our business.

Market acceptance and sales of any one or more of our product candidates will depend on reimbursement policies and may be affected by future healthcare reform measures in the United States and in foreign jurisdictions.

Government authorities and third-party payers, such as private health insurers and health maintenance organizations, decide which drugs they will cover and establish payment levels.

We cannot be certain that reimbursement will be available for any of our product candidates.

Also, we cannot be certain that reimbursement policies will not reduce the demand for, or the price paid for, our products.

If reimbursement is not available or is available on a limited basis, we may not be able to successfully commercialize any product candidates that we develop.

In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (the “MMA”), changed the way Medicare covers and pays for pharmaceutical products.

The legislation established Medicare Part D, which expanded Medicare coverage for outpatient prescription drug purchases by the elderly but provided authority for limiting the number of drugs that will be covered in any therapeutic class.

The MMA also introduced a new reimbursement methodology based on average sales prices for physician-administered drugs.

The United States and several foreign jurisdictions are considering, or have already enacted, a number of legislative and regulatory proposals to change the healthcare system in ways that could affect its ability to sell its products profitably.

Among policy makers and payers in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access to healthcare.

In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

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 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.

Reduced prices and reimbursement rates due to the actions of governments, payors, or competition or other healthcare cost containment initiatives such as restrictions on use, may negatively impact profits.

The continuing efforts of governments, pharmaceutical benefit management organizations, insurance companies, managed care organizations and other payors of health care costs to contain or reduce costs of health care may adversely affect the price, market access, and total revenues of our products.

These organizations, together with governments, have increasingly imposed utilization management tools favoring the use of generic products.

As these practices expand, we may face difficulty in obtaining or maintaining timely or adequate pricing or formulary placement of our products.

In addition, we have experienced and expect to continue to experience increased competitive activity, which has resulted in lower overall prices for our products.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (together, “PPACA”) and other legislative or regulatory requirements or potential legislative or regulatory actions regarding healthcare and insurance matters, along with the trend toward managed healthcare in the U.S., could adversely influence the purchase of healthcare products and reduce demand and prices for our products.

In addition, in certain foreign markets, the pricing of prescription drugs is subject to government control and reimbursement may in some cases be unavailable.

We believe that pricing pressures will continue and may increase.

More recently, presidential administrations and the U.S.

Congress have taken actions in an effort to modify or replace PPACA and to implement or pass other reforms to the healthcare system, including proposed legislation related to the pricing of pharmaceuticals.

There is uncertainty with respect to any potential changes that may be proposed and what the impact, if any, will be on our business, including the impact on coverage and reimbursement for healthcare items and services covered by plans that were authorized by PPACA.

However, we cannot predict the ultimate content, timing or effect of any healthcare reform legislation or the impact of potential legislation on us.

We expect that additional state and federal healthcare reform measures will be considered and potentially adopted, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our products once approved or additional pricing pressures and may adversely affect our operating results.

Our product candidates may be subject to government price controls that may affect our revenue.

There has been heightened governmental scrutiny in the United States and abroad of pharmaceutical pricing practices considering the rising cost of prescription drugs and biologics.

In the United States, such scrutiny has resulted in several recent Congressional inquiries and proposed and enacted federal legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products.

At the federal level, the former Trump Administration’s budget proposal for fiscal year 2020 contained further drug price control measures that could be enacted during the 2020 budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients.

The former Trump Administration also released a “Blueprint”, or plan, to lower drug prices and reduce out-of-pocket costs of drugs that contains additional proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products, and reduce the out-of-pocket costs of drug products paid by consumers.

HHS has solicited feedback on some of these measures and has implemented others under its existing authority.

For example, in May 2019, CMS issued a final rule to allow Medicare Advantage plans the option to use step therapy for Part B drugs beginning January 1, 2020.

This final rule codified CMS’s policy change that was effective January 1, 2019.

On November 20, 2020, CMS issued an interim final rule through the CMS Innovation Center whereby Medicare Part B reimbursement for “certain high-cost prescriptions drugs” would be no more than most-favored-nation price (i.e., the lowest price) after adjustments, for a pharmaceutical product that the drug manufacturer sells in a member country of the Organization for Economic Cooperation and Development that has a comparable per-capita gross domestic product.

On December 28, 2020, the United States District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule.

While some of these and other measures may require additional authorization to become effective, members of Congress and the Biden Administration have indicated that they will continue to seek new legislative and/or administrative measures to control drug costs.

For example, the recently enacted Inflation Reduction Act contains provisions designed to limit the prices paid by Medicare for various prescription drugs.

At the state level, legislatures have become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

Outside of the United States, particularly in the European Union, the pricing of prescription pharmaceuticals is subject to governmental control.

In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product.

To obtain coverage and reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies.

If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed.

Risks Related to Our Common Stock

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

Innoviva, our principal stockholder , beneficially owns greater than 50% of our outstanding shares of common stock, which causes 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 .

As of December 31, 2023, Innoviva owns 69.5% 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.

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.

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.

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 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 to take advantage of any of these exemptions.

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.

1 unchanged sentence

Accordingly, our stockholders other than Innoviva may be unable to influence management and exercise control over our business.

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

The price of our securities has been volatile and may continue to be so, and purchasers of our securities could incur substantial losses.

The price of our securities has been volatile and may continue to be so.

Between January 1, 2023 and December 31, 2023, the high and low sales prices of our common stock as reported on The New York Stock Exchange American varied between $1.10 and $4.35 per share.

The stock market in general and the market for biotechnology and biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the companies’ operating performance, in particular during the last several years.

As of December 31, 2023, we had outstanding common warrants to purchase an aggregate of 19,365,847 shares of our common stock at a weighted-average exercise price of $3.59 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 3,165,216 shares of our common stock at a weighted-average exercise price of $5.04 per share.

Although we cannot determine when these warrants or options will ultimately be exercised, it is reasonable to assume that such warrants and options will be exercised only if the exercise price is below the market price of our common stock.

To the extent any of our outstanding warrants or options are exercised, additional shares of our common stock will be issued that will generally be eligible for resale in the public market (subject to limitations under Rule 144 under the Securities Act for certain of our warrants and with respect to shares held by our affiliates), which will result in dilution to our security holders.

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.

We have never declared or paid cash dividends on our common stock.

We do not anticipate paying any cash dividends on our common stock in the foreseeable future.

We currently intend to retain all available funds and any future earnings to fund the development and growth of our business.

As a result, capital appreciation, if any, of our common stock will be our stockholders’ sole source of gain for the foreseeable future.

To the extent any of our outstanding warrants or options are exercised, additional shares of our common stock will be issued which will result in dilution to our security holders and could also have an adverse effect on the market price of our common stock.

Raising additional capital may cause dilution to our stockholders, restrict our operations, and/or require us to relinquish rights to our technologies or product candidates .

Until such time, if ever, that we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, and strategic collaboration and licensing arrangements.

The terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our common stock to decline.

Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, licensing or assigning our intellectual property rights, declaring dividends, and possibly other restrictions.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our Common Stockholders.

Attempting to secure additional financing may also divert our management from our day-to-day activities, which could impair or delay our ability to develop our product candidates.

Furthermore, if, in the future, one or more banks or financial institutions enter receivership or become insolvent in response to financial conditions affecting the banking

system or financial markets, our ability to access our existing cash, cash equivalents, and marketable securities may be threatened and could have a material impact on our business and financial condition.

If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our product development or future commercialization efforts.

Alternatively, we could be required to seek collaborators for our product candidates at an earlier stage than would otherwise be desirable or on terms that are less favorable than might otherwise be available.

We might need to relinquish or license on unfavorable terms our rights to our product candidates in markets where we otherwise would seek to pursue development and commercialization ourselves, or to license our intellectual property to others who could develop products that will compete with our products.

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

General Risk Factors

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 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 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.

To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liabilities and the development of our product candidates could be delayed or otherwise adversely affected.

Even though we believe we carry commercially reasonable business interruption and liability insurance, we might suffer losses as a result of business interruptions that exceed the coverage available under our insurance policies or for which we do not have coverage.

For example, we are not insured against terrorist attacks or cyberattacks.

Any natural disaster or catastrophic event could have a significant negative impact on our operations and financial results.

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.

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.

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.

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.

We rely upon a variety of Internet service providers, third-party hosting facilities and cloud computing platform providers to support our business.

Failure to maintain the security, confidentiality, accessibility or integrity of data stored on such systems could damage our reputation in the market, cause us to lose revenue or market share, increase our service costs, cause us to incur substantial costs, subject us to liability for damages and/or fines and divert our resources from other tasks, any one of which could materially adversely affect our business, financial condition, results of operations and prospects.

Any damage to, or failure of, such systems, or communications to and between such systems, could result in interruptions in our operations.

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.

If securities or industry analysts do not publish research or publish unfavorable research about our business, our stock price and trading volume could decline.

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.

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

If we obtain additional securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline.

If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

Sales of a substantial number of shares of our common stock in the public market by our existing stockholders could cause our stock price to decline.

Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities.

We are unable to predict the effect that sales may have on the prevailing market price of our common stock.

Future sales and issuances of our common stock or rights to purchase common stock by us, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to decline.

We are generally not restricted from issuing additional common stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock.

The market price of our common stock could decline as a result of sales of common stock or securities that are convertible into or exchangeable for, or that represent the right to receive, common stock or the perception that such sales could occur.

We expect that significant additional capital will be needed in the future to continue our planned operations, including conducting clinical trials, commercialization efforts, expanded research and development activities and costs associated with operating as a public company.

To the extent we raise additional capital by issuing equity or convertible securities, our stockholders may experience substantial dilution.

We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time.

If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales.

Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders.

Pursuant to our 2016 Equity Incentive Plan (the “2016 Plan”), our management is authorized to grant stock options and other equity-based awards to our employees, directors and consultants.

The number of shares available for future grant under the 2016 Plan will automatically increase on January 1 st of each year by up to 5% of all shares of our capital stock outstanding as of December 31 st of the preceding calendar year, subject to the ability of our Board of Directors to take action to reduce the size of the increase in any given year.

In addition, we may grant or provide for the grant of rights to purchase shares of our common stock pursuant to our 2016 Employee Stock Purchase Plan (“ESPP”).

The number of shares of our common stock reserved for issuance under the ESPP will automatically increase on January 1 st of each calendar year by the lessor of 1% of the total number of shares of our common stock outstanding on December 31 st of the preceding calendar year and 30,000 shares, subject to the ability of our Board of Directors to take action to reduce the size of the increase in any given year.

Currently, we plan to register the increased number of shares available for issuance under the 2016 Plan and ESPP each year.

Increases in the number of shares available for future grant or purchase may result in additional dilution, which could cause our stock price to decline.

Provisions of Washington law and our current articles of incorporation and bylaws may discourage another company from acquiring us and may prevent attempts by our stockholders to replace or remove our current management.

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.

These provisions include:

● authorizing the issuance of “blank check” preferred stock without any need for action by stockholders;

● requiring supermajority stockholder voting to effect certain amendments to our articles of incorporation and bylaws;

● establishing advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings.

In addition, because we are incorporated in Washington, we are governed by the provisions of Chapter 23B.19 of the Washington Business Corporation Act, which, among other things, restricts the ability of stockholders owning 10% or more of our outstanding voting stock from merging or combining with us.

These provisions could discourage potential acquisition attempts and could reduce the price that investors might be willing to pay for shares of our common stock in the future and result in the market price being lower than it would without these provisions.

Although we believe these provisions collectively provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our board of directors, they would apply even if an offer may be considered beneficial by some stockholders.

In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it difficult for stockholders to replace members of our Board of Directors, which is responsible for appointing the members of our management.

Foreign governments tend to impose strict price controls, which may adversely affect our future profitability.

In some foreign countries, particularly in the European Union, prescription drug pricing is subject to governmental control.

In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product.

To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies.

If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our profitability will be negatively affected.

We may incur significant costs complying with environmental laws and regulations, and failure to comply with these laws and regulations could expose us to significant liabilities.

Our research and development activities use biological and hazardous materials that are dangerous to human health and safety or the environment.

We are subject to a variety of federal, state and local laws and regulations governing the use, generation, manufacture, storage, handling and disposal of these materials and wastes resulting from these materials.

We are also subject to regulation by the Occupational Safety and Health Administration (“OSHA”), state and federal environmental protection agencies and to regulation under the Toxic Substances Control Act.

OSHA, state governments or federal Environmental Protection Agency, may adopt regulations that may affect our research and development programs.

We are unable to predict whether any agency will adopt any regulations that could have a material adverse effect on our operations.

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.

Taxing authorities could reallocate our taxable income among our subsidiaries, which could increase our overall tax liability.

We are organized in the United States, and we currently have subsidiaries in the United Kingdom and Australia.

If we succeed in growing our business, we expect to conduct increased operations through our subsidiaries in various tax jurisdictions pursuant to transfer pricing arrangements between us and our subsidiaries.

If two or more affiliated companies are located in different countries, the tax laws or regulations of each country generally will require that transfer prices be the same as those between unrelated companies dealing at arm’s length and that appropriate documentation is maintained to support the transfer prices.

While we believe that we operate in compliance with applicable transfer pricing laws and intend to continue to do so, our transfer pricing procedures are not binding on applicable tax authorities.

If tax authorities in any of these countries were to successfully challenge our transfer prices as not reflecting arm’s length transactions, they could require us to adjust our transfer prices and thereby reallocate our income to reflect these revised transfer prices, which could result in a higher tax liability to us.

In addition, if the country from which the income is reallocated does not agree with the reallocation, both countries could tax the same income, resulting in double taxation.

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

Unfavorable global economic conditions, whether brought about by material global crises, health epidemics, military conflicts or war, geopolitical and trade disputes or other factors, may adversely affect our business and financial results.

Our business is sensitive to global economic conditions, which can be adversely affected by epidemics and other public health crises, political and military conflict, trade and other international disputes, significant natural disasters (including as a result of climate change) or other events that disrupt macroeconomic conditions.

Adverse macroeconomic conditions, including inflation, slower growth or recession, new or increased tariffs and other barriers to trade, changes to fiscal and monetary policy or government budget dynamics (particularly in the pharmaceutical and biotech areas), tighter credit, higher interest rates, volatility in financial markets, high unemployment, labor availability constraints, currency fluctuations and other challenges in the global economy have in the past adversely affected, and may in the future adversely affect, us and our business partners and suppliers.

Further, military conflicts or wars (such as the ongoing conflicts between Russia and Ukraine and Israel and Palestine ) can cause exacerbated volatility and disruptions to various aspects of the global economy.

The uncertain nature, magnitude, and duration of hostilities stemming from such conflicts, including the potential effects of sanctions and counter-sanctions, or retaliatory cyber-attacks on the world economy and markets, have contributed to increased market volatility and uncertainty, which could have an adverse impact on macroeconomic factors that affect our business and operations, such as worldwide supply chain issues.

It is not possible to predict the short- and long-term implications of military conflicts or wars or geopolitical tensions which could include further sanctions, uncertainty about economic and political stability, increases in inflation rate and energy prices, cyber-attacks, supply chain challenges and adverse effects on currency exchange rates and financial markets.

Additionally, the operations of our suppliers and manufacturers may be located in areas that are prone to earthquakes, wildfires and other natural disasters.

Such operations and facilities are also subject to the risk of interruption by drought, power shortages, nuclear power plant accidents and other industrial accidents, terrorist attacks and other hostile acts, ransomware and other cybersecurity attacks, labor disputes, public health crises, and other events beyond the Company’s control.

Global climate change is resulting in certain types of natural disasters occurring more frequently or with more intense effects.

Such events can create delays or interruptions to the Company’s development efforts and inefficiencies in the Company’s supply and manufacturing chain.

Significant delays in our development efforts could materially impact our ability to obtain regulatory approval and to commercialize our products.

Any public health crises may affect our operations and those of third parties on which we rely, including our business partners and suppliers.

The COVID-19 pandemic has had an adverse impact on the global economy, including as a result of impacts associated with protective health measures that we, other businesses and governments are taking or might have to take again in the future to manage the pandemic.

Without limiting the foregoing, we have experienced and/or may in the future experience:

● delays in receiving authorization from regulatory authorities to initiate any planned clinical trials, inspections, reviews and approvals of products;

● delays or difficulties enrolling patients in our clinical trials;

● delays in or disruptions to the conduct of preclinical programs and clinical trials;

● constraints on the movement of products and supplies through the supply chain, which can disrupt our ability to conduct clinical trials and develop our products;

● price increases in raw materials and capital equipment, as well as increasing price competition in our markets;

● adverse impacts on our workforce and/or key employees;

● increased risk that counterparties to our contractual arrangements will become insolvent or otherwise unable to fulfill their contractual obligations.

Our operations could be disrupted by failure of our information systems or cyber-attacks.

Our operations could be disrupted if our information systems fail, if we are unsuccessful in implementing necessary upgrades or if we are subject to cyber-attacks.

Our business depends on the efficient and uninterrupted operation of our computer and communications systems and networks, hardware and software systems and our other information technology.

We collect and maintain information, which includes confidential and proprietary information as well as personal information regarding our employees, in digital form.

Data maintained in digital form is subject to risk of cyber-attacks, which are increasing in frequency and sophistication.

Cyber-attacks could include the deployment of harmful malware, viruses, worms, and other means to affect service reliability and threaten data confidentiality, integrity and availability.

Despite our efforts to monitor and safeguard our systems to prevent data compromise, the possibility of a future data compromise cannot be eliminated entirely, and risks associated with intrusion, tampering, and theft remain.

A failure of our systems, or an inability to successfully expand the capacity of these systems, or an inability to successfully integrate new technologies into our existing systems could have a material adverse effect on our business, results of operations, financial condition, and cash flows.

The Company’s and its vendors’ sophisticated information technology operations are spread across multiple, sometimes inconsistent, platforms, which pose difficulties in maintaining data integrity across systems.

The ever-increasing use and evolution of technology, including cloud-based computing, creates opportunities for the unintentional or improper dissemination or destruction of confidential information stored in the Company’s systems.

Any breach of our security measures or the accidental loss, inadvertent disclosure, unapproved dissemination, misappropriation or misuse of trade secrets, proprietary information or other confidential information, whether as a result of theft, hacking, fraud, trickery or other forms of deception, or for any other cause, could adversely affect our business position.

Further, any such interruption, security breach, loss or disclosure of confidential information could result in financial, legal, business and reputational harm to the Company and could have a material adverse effect on our business, financial condition, results of operations, cash flows and stock price.

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