What changed in this filing

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Item 1A. Risk Factors

2025-03-21 compared with 2024-03-21 · 133 added, 96 removed, 406 unchanged (36% of the section changed)

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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, climate change, extreme weather and natural disasters.

Additionally, our business is subject to general risks applicable to any company, such as economic conditions, geopolitical events, trade restrictions, 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.

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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.

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.

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● 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.

● 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.

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

● We 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.

● 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;

● Results from interim, “topline,” and preliminary data, or 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 and are subject to audit and verification procedures that could result in material changes in the final data.

● 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 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 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 face potential risks associated with future changes in laws and policies, including the availability of government funding for grants, staffing and funding of regulatory agencies.

● The use or anticipated use of artificial intelligence (“AI”) technologies, including generative AI, by us or third parties, may increase or create new operational risks.

● 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.

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

Our financial statements as of December 31, 2023 and December 31, 2022 were prepared under the assumption that we will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.

Our consolidated financial statements as of December 31, 2024 and December 31, 2023 were prepared under the

assumption that we will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.

As of December 31, 2024, we had unrestricted cash and cash equivalents of $9.3 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.

Our outstanding term loans, which comprise of $60.0 million of principal and $9.4 million of accrued interest, mature in January 2026 and in June 2025.

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

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.

Our ability to raise additional capital via equity or debt financing may be adversely impacted by potential worsening global economic conditions and the 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.

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

● the continued availability of government funding for grants.

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

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

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, political, 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.

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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.

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, 2024, our accumulated deficit was $327.7 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.

Additional information regarding our results of operations may be found in our consolidated financial statements included in Item 8 in this 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 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.

aureus bacteremia.

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

If we fail to maintain compliance with those obligations, we may be subject to potential liability and may result in the termination of our government contracts, including the MTEC Agreement.

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 award and have entered into a multi-year program administered by the U.S Department of Defense through MTEC and managed by the Naval Medical Research Command (NMRC) – Naval Advanced Medical Development (NAMD) 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.

In July 2024, the MTEC Agreement was modified to increase the total award by $5.3 million to $21.6 million and extend the term into the third quarter of 2025.

We are using the award to partially fund a Phase 1b/2a, multicenter, randomized, double-blind, placebo-controlled dose escalation study that will assess the safety, tolerability and efficacy of our phage-based candidate, AP-SA02, for the treatment of adults with S.

aureus (“diSArm” study) .

Government contracts and grants normally contain additional requirements that may increase our costs of doing business and expose us to liability for failure to comply with these terms and conditions.

These requirements include, for example:

These requirements have historically included and may continue to include, for example:

● tracking of contract costs and maintenance of effective controls over tracking of such costs;

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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.

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.

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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.

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.

Results from interim, “top-line,” and preliminary data, or 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 and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publicly disclose interim, top-line or preliminary data from our preclinical studies and clinical trials, based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial.

We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data when we publicly disclose such data.

As a result, any interim, top-line or preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated.

Preliminary or top-line data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published.

As a result, interim, top-line and preliminary data should be viewed with caution until the final data are available.

In addition, preliminary or interim data from ongoing clinical trials are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available or as patients from our clinical trials continue other treatments for their disease.

Adverse differences between any preliminary or interim data we disclose and final data could significantly harm our business prospects.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general.

In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure.

Any information we determine not to disclose may ultimately be deemed significant by investors or others with respect to future decisions, conclusions, views, activities or otherwise regarding a particular product candidate or our business.

If the interim, top-line or preliminary data that we report differ from final results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, product candidates may be harmed, which could significantly harm our business, financial condition, results of operations and prospects.

Preclinical studies, including studies of our product candidates in animal disease models, may not accurately predict the result of human clinical trials of those product candidates.

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Regulators often allow single-patient expanded access on a case-by-case basis for an individual patient or for defined groups of patients with similar treatment needs.

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

In some countries, such as Australia, the treating physician can

administer treatment under single-patient expanded access guidelines without pre-approval from the applicable regulatory authority.

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

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

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

product candidates.

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

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● delays in reaching a consensus with regulatory agencies on trial design or in obtaining regulatory approval to commence a trial;

● changes in the FDA and foreign regulatory approval processes, staffing, resources or perspectives that may delay or prevent the approval of future products and result in lost market opportunity;

● changes in regulations or judicial decisions, or new interpretations of existing laws, regulations or judicial decisions, related to health care availability, pricing or marketing practices, compliance with employment practices, method of delivery, payment for health care products and services, compliance with health information and data privacy and security laws and regulations, tracking and reporting payments and other transfers of value made to physicians and teaching hospitals, extensive anti-bribery and anti-corruption prohibitions, product serialization and labeling requirements and used product take-back requirements;

● delays in obtaining clinical materials;

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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 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.

We are continuing to develop novel manufacturing processes for our phage product candidates at our facility in Los Angeles, California.

Construction of the new manufacturing facility in Los Angeles, California was completed 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.

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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.

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.

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In addition, such studies would be subject to the applicable local laws and FDA acceptance of the data would be dependent upon its determination that the studies also complied with all applicable U.S.

laws and regulations.

There can be no assurance the FDA will accept data from trials conducted outside of the United States.

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A delay or denial of regulatory approval could delay or prevent our ability to generate product revenues and to achieve profitability.

Changes in regulatory approval policies during the development period of any of our product candidates, changes in, or the enactment of, additional regulations or statutes, or changes in regulatory review practices for a submitted product application may cause a delay in obtaining approval or result in the rejection of an application for regulatory approval.

Changes in regulatory approval policies during the development period of any of our product candidates, changes in, or the enactment of, additional regulations or statutes, changes in regulatory review practices for a submitted product application, or changes in regulatory staffing and funding may cause a delay in obtaining approval or result in the rejection of an application for regulatory approval.

Regulatory approval, if obtained, may be made subject to limitations on the indicated uses for which we may market a product.

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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.

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.

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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.

Most healthcare providers are subject to privacy and security regulations promulgated under HIPAA, as amended by HITECH, as well as similar state laws governing the collection, use, and disclosure of health-related information.

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.

Consequently, depending on the facts and circumstances, we could face substantial negative consequences – including criminal penalties, regulatory fines, reputational damage, and other harmful effects – 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 governing the use, security, and disclosure of such information.

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.

We also 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.

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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.

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.

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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 collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the European Union (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.

In addition, the GDPR 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.

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

From January 1, 2021, companies have had to comply with both the GDPR and 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.

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.

We face potential risks associated with future changes in laws and policies, including the availability of government funding for grants, staffing and funding of regulatory agencies.

In the United States, changes in the U.S.

government between administrations have resulted in potential changes in regulations, fiscal policy, social programs, domestic and foreign relations and international trade policies.

Our ability to respond to these developments or comply with any resulting new legal or regulatory requirements, including those involving economic and trade sanctions, could increase our costs of doing business, reduce our financial flexibility and otherwise have a material adverse effect on our business, financial condition and results of our operations.

Our operations, including research, development, and clinical programs and trials, are largely dependent on government grants (for example, the MTEC Agreement, which is paid over the term of the award), meaning any substantial policy shift or executive action that restricts or diminishes the availability of these funds could materially harm our business.

The use or anticipated use of artificial intelligence (“AI”) technologies, including generative AI, by us or third parties, may increase or create new operational risks.

AI technologies offer numerous potential benefits, such as creating or increasing operational efficiencies, and we expect an increase in the use of AI and generative AI by us, third parties on our behalf, and other market actors, including our competitors.

However, the deployment of such technologies also poses certain risks, including that the algorithms may be flawed, misused or otherwise function in an unexpected manner;

data sets may be insufficient, of poor quality, or contain biased information;

and inappropriate or controversial data practices by data scientists, engineers, and end-users could impair results.

The relative newness of the technology, the speed at which it is being adopted, and the paucity of laws, regulations or standards expressly and specifically governing its use increases these risks.

If the analyses that AI-based applications assist in producing are deficient or inaccurate, we could be subjected to competitive harm, potential legal liability and brand or reputational harm.

Our competitors may also adopt AI or generative AI more quickly or more effectively than we do, which could cause competitive harm.

Furthermore, use of AI-based software may lead to the release of confidential information which may impact our ability to realize the benefits of our intellectual property.

Risks Related to Our Intellectual Property

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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.

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.

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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.

Patent and Trademark Office (“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.

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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.

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.

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Risks Related to Our Industry

There is a high rate of failure inherent in drug discovery and development, and failure can occur at any point in the process, including in later stages after substantial investment.

New product candidates that appear promising in development or prior to being acquired may fail to reach the market or may have only limited commercial success because of efficacy or safety concerns, inability to obtain or maintain necessary regulatory approvals or payor reimbursement or coverage, failure to obtain placement on guidelines or recommendations published by third-party organizations that are commensurate with clinical data, the application of pricing controls, limited scope of approved uses, label changes, changes in the relevant treatment standards or the availability of newer better, or more cost-effective competitive products, difficulty or excessive costs to manufacture, insufficient infrastructure to support detection, diagnostic or other requisites for treatment, ineffectiveness in reaching healthcare professionals, including digitally given the increase in virtual engagements, or infringement of the patents or intellectual property rights of others.

We may also fail to allocate research and development resources efficiently, fail to pursue or invest sufficiently in product candidates or indications that may have been successful, or fail to optimally balance trial design, conduct, and speed to accomplish desired outcomes.

Regulatory agencies establish high hurdles for the efficacy and safety of new products and indications.

Delay, uncertainty, unpredictability, and inconsistency in drug approval processes across markets and agencies can result in delays in product launches, lost market opportunities, impairment of inventories, and other negative impacts.

In addition, it can be very difficult to predict revenue growth rates of, or variability in demand for, new products and indications,

which in some cases leads to difficult meeting product demand or, on the other hand, excess inventory and related financial charges.

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

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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.

Given 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.

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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.

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:

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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.

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.

Current and future healthcare reform measures may affect our results of operations.

In the United States, federal and state legislatures, health agencies and third-party payors continue to focus on containing the cost of health care.

Legislative and regulatory proposals, enactments to reform health care insurance programs and increasing pressure from social sources could significantly influence the manner in which our future products may be prescribed, purchased and reimbursed, which may adversely affect our results of operations.

In the European Union and some other international markets, the government provides health care at low cost to consumers and regulates pharmaceutical prices, patient eligibility or reimbursement levels to control costs for the government-sponsored health care system.

Many countries have announced or implemented measures, and may in the future implement new or additional measures, to reduce health care costs to limit the overall level of government expenditures.

These measures vary by country and may include, among other things, patient access restrictions, suspensions on price increases, prospective and possible retroactive price reductions and other recoupments and increased mandatory discounts or rebates, recoveries of past price increases and greater importation of drugs from lower-cost countries.

These measures may adversely affect our future revenue and business operations.

Our business is subject to increasing government price controls and other public and private restrictions on pricing, reimbursement, and access for our drugs, which could have a material adverse effect on our results of operations, reputation or business.

Public and private payors continue to take aggressive steps to control their expenditures for pharmaceuticals by placing restrictions on pricing and reimbursement for, and patient access to, medicines.

Governments and private payors worldwide have intensified their scrutiny of, and actions intended to address, pricing, reimbursement, and access to pharmaceutical products and are demanding greater commercial and clinical value from pharmaceutical companies in the form of strong product differentiation and demonstrated value.

The effect of reducing prices and reimbursement would significantly impact potential future revenues and business opportunities.

Within the United States, state level transparency initiatives, importation rules, reporting requirements, and mandated programs, may also increase administrative costs, in some cases, compromise confidential business practices and otherwise detrimentally impact our business.

Heightened governmental scrutiny over the manner in which drug manufacturers price their marketed products and the practices of pharmacy benefit managers and other supply chain entities has also resulted in several U.S.

Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, require advance notice of list price increases, establish upper payment limits or other restrictions by drug affordability review boards, allow the importation of drugs from other countries, address pharmacy benefit manager practices, and reform government program reimbursement methodologies for drug products.

In particular, the IRA contains provisions designed to limit the prices paid by Medicare for various prescription drugs.

While the impact of the IRA on the pharmaceutical industry cannot yet be fully determined, it is likely to be significant.

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

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As of December 31, 2024, Innoviva owns 69.3% 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.

If Innoviva were to exercise the warrants held by them, they would hold approximately

80.0% 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.

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

Furthermore, any sales by Innoviva of a substantial number of shares of our Common Stock, or the expectation of such sales, could cause a significant reduction in the market price of our Common Stock.

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.

Between January 1, 2024 and December 31, 2024, the high and low sales prices of our Common Stock as reported on NYSE varied between $1.85 and $4.18 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.

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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.

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 loan 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.

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.

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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.

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 (including tariffs, embargoes, sanctions or other trade restrictions), significant natural disasters (including as a result of climate change) or other events that disrupt macroeconomic conditions.

Pandemics, such as the COVID-19 pandemic, have in the past impacted and may in the future impact our business, operations and financial condition and results.

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.

Further, military conflicts or wars (such as the ongoing conflicts between Russia and Ukraine and in the Middle East ) 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.

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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.

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:

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

Our operations could be disrupted if our information systems—or those of our vendors— fail, if we or our vendors are unsuccessful in implementing necessary upgrades, or if we or our vendors are subject to successful 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.

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

Data maintained in digital form is subject to risk of cyber-attacks, which 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 (as discussed below in Item 1C), such attacks are increasing in frequency and sophistication, and the possibility of a future data compromise, and risks associated with intrusion, tampering, and theft, cannot be eliminated entirely.

We have experienced cyber-attacks in various forms, including phishing and other attempts to compromise our systems, but none of these has resulted in a material incident.

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.

Further, our cybersecurity controls may not function as intended or our logging may be insufficient to fully investigate an incident.

A system failure, accident or security breach may also result in a material disruption of our independent drug development programs.

For example, the loss of clinical trial data from ongoing or future clinical trials for any of our product candidates could result in delays in regulatory approval efforts and significantly increase costs to recover or reproduce the data.

Our information security systems are also subject to laws and regulations requiring that we take measures to protect the privacy and security of certain information we gather and use in our business.

For example, federal and state laws, including, without limitation, state security breach notification laws, state health information privacy laws and federal and state consumer protection laws, govern the collection, use, disclosure and storage of personal information.

To the extent that any disruption or security breach were to result in a loss of or damage to data or applications, or inappropriate disclosure of confidential or proprietary information or personal health information, we could incur substantial liability, our reputation would be damaged and the further development of our product candidates could be delayed.

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.

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.

A compromise of the security or integrity of any of these systems could adversely affect our security posture.

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.

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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