What changed in this filing

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Item 1A. Risk Factors

2023-11-09 compared with 2023-08-09 · 96 added, 95 removed, 1070 unchanged (15% of the section changed)

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If we are unable to obtain, maintain or protect intellectual property rights related to our product candidates, or if the scope of such intellectual property protection is not sufficiently broad, we may not be able to compete effectively in our markets;

Our business could continue to be adversely affected by the effects of the ongoing Ukraine-Russia conflict and other geopolitical and macroeconomic conditions;

Our business could continue to be adversely affected by the effects of the ongoing Ukraine-Russia conflict, the conflict in the Middle East, and other geopolitical and macroeconomic conditions;

Our future success depends on our ability to retain key employees, consultants and advisors and to attract, retain and motivate qualified personnel;

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In addition, the inclusion of critically ill patients in our clinical trials may result in deaths or other adverse medical events due to the natural progression of the disease.

Further, if patients drop out of our ongoing or future trials, miss scheduled doses or follow-up visits or otherwise fail to follow trial protocols, or if our trials are otherwise disrupted due to the ongoing Ukraine-Russia conflict, outbreaks of contagious diseases (such as the COVID-19 pandemic) or other adverse macroeconomic or geopolitical events, the integrity of data from our trials may be compromised or not accepted by the FDA or other regulatory authorities, which would represent a significant setback for the applicable program.

Further, if patients drop out of our ongoing or future trials, miss scheduled doses or follow-up visits or otherwise fail to follow trial protocols, or if our trials are otherwise disrupted due to the ongoing Ukraine-Russia conflict, the conflict in the Middle East,, outbreaks of contagious diseases (such as the COVID-19 pandemic) or other adverse macroeconomic or geopolitical events, the integrity of data from our trials may be compromised or not accepted by the FDA or other regulatory authorities, which would represent a significant setback for the applicable program.

In addition, the COVID-19 pandemic previously impacted clinical trials broadly, including our completed efzofitimod Phase 1b/2a trial in patients with pulmonary sarcoidosis, where many sites stopped enrollment and patients chose not to enroll or continue participating in the trial due to the impact of COVID-19.

While we completed the clinical trial, the availability of results from the Phase 1b/2a clinical trial was delayed until September 2021.

We may experience delays in site initiation and patient enrollment, failures to comply with study protocols, delays in the manufacture of study drug for clinical testing and other difficulties in starting or completing our EFZO-FIT study, our EFZO-CONNECT study or future trials due to the ongoing Ukraine-Russia conflict, outbreaks of contagious diseases (such as the COVID-19 pandemic) or other adverse macroeconomic or geopolitical events.

We may experience delays in site initiation and patient enrollment, failures to comply with study protocols, delays in the manufacture of study drug for clinical testing and other difficulties in starting or completing our EFZO-FIT study, our EFZO-CONNECT study or future trials due to the ongoing Ukraine-Russia conflict, the conflict in the Middle East, outbreaks of contagious diseases (such as the COVID-19 pandemic) or other adverse macroeconomic or geopolitical events.

If we are unable to successfully complete or otherwise advance clinical development, obtain regulatory or marketing approval for, or successfully commercialize our therapeutic product candidates, including efzofitimod, or experience significant delays in doing so, our business will be materially harmed.*

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During the third quarter of 2022, we initiated the EFZO-FIT study.

To date, the FDA has not approved any product for the treatment of patients with pulmonary sarcoidosis, and as such, there is no established FDA regulatory pathway for approval of a drug in

that indication.

To date, the FDA has not approved any product for the treatment of patients with pulmonary sarcoidosis, and as such, there is no established FDA regulatory pathway for approval of a drug in that indication.

The most appropriate efficacy endpoints to demonstrate clinically meaningful treatment effects have not been established.

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The eligibility criteria for any of our clinical trials may further limit the pool of available participants in our trials.

For example, if patients have been previously prescribed certain other medications to treat pulmonary sarcoidosis, they may not be

eligible to participate in the EFZO-FIT study, thus further reducing our patient pool.

For example, if patients have been previously prescribed certain other medications to treat pulmonary sarcoidosis, they may not be eligible to participate in the EFZO-FIT study, thus further reducing our patient pool.

We may be unable to identify and enroll a sufficient number of patients with the disease in question and who meet the eligibility criteria for, and are willing to participate in, the clinical trials.

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We have also identified neuropilin-2 (NRP2) as a receptor for efzofitimod and have focused research efforts on NRP2 biology.

Our future success is highly dependent on the successful development of product candidates based on these new areas of biology, including efzofitimod, and additional product candidates arising from proteins derived from tRNA synthetases, including aminoacyl-tRNA synthetase (AARS) and aspartyl-tRNA synthetase (DARS).

Our future success is highly dependent on the successful development of product

candidates based on these new areas of biology, including efzofitimod, and additional product candidates arising from proteins derived from tRNA synthetases, including aminoacyl-tRNA synthetase (AARS) and aspartyl-tRNA synthetase (DARS).

Extracellular tRNA synthetase-based biology represents a novel approach to drug discovery and development, and to our knowledge, no drugs have been developed using, or based upon, this approach.

pathways represent a novel class of protein therapeutics, and our development of these therapeutics is based on our new understanding of human physiology.

Despite the successful development of other naturally occurring proteins, such as erythropoietin and insulin, as therapeutics, proteins derived from HARS, AARS or DARS families and from other tRNA synthetase pathways represent a novel class of protein therapeutics, and our development of these therapeutics is based on our new understanding of human physiology.

In particular, the mechanism of action of tRNA synthetases and their role in immunomodulation and tissue regeneration have not been studied extensively, nor has the safety of this class of protein therapeutics been evaluated extensively in humans.

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Our classification of diseases based on the existence of excessive immune cell activation or lack thereof and our hypothesis that these represent potential indications for our product candidates may not prove to be therapeutically relevant.

Accordingly, the conclusions that we have drawn from animal studies and patient sample data regarding the potential immunomodulatory activity of efzofitimod may not be substantiated in other animal models or in clinical trials.

Accordingly, the

conclusions that we have drawn from animal studies and patient sample data regarding the potential immunomodulatory activity of efzofitimod may not be substantiated in other animal models or in clinical trials.

Further, based on the discovery of the involvement of NRP2 in the mechanism of action of efzofitimod, we are still expanding our knowledge of the role of the NRP2 pathway in regulating immune responses.

Although we were able to establish clinical proof-of-concept for efzofitimod in our Phase 1b/2a clinical trial in patients with pulmonary sarcoidosis, this may not be validated in other clinical trials.

Any failure to demonstrate in controlled clinical

trials the requisite safety and efficacy of our product candidates will adversely affect our business, prospects, financial condition and results of operations.

Any failure to demonstrate in controlled clinical trials the requisite safety and efficacy of our product candidates will adversely affect our business, prospects, financial condition and results of operations.

We have previously conducted and we or our third party collaborators may conduct additional clinical trials of efzofitimod outside of the United States.

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After implementation of these procedures, we observed a decreased rate of IRRs in our clinical trials of ATYR1940.

We did not observe IRRs in our completed Phase 1b/2a clinical trial of efzofitimod in patients in pulmonary sarcoidosis or in our other efzofitimod clinical trials, but we cannot assure that this will be the case in any future clinical trials.

We did not observe IRRs in our completed Phase

1b/2a clinical trial of efzofitimod in patients in pulmonary sarcoidosis or in our other efzofitimod clinical trials, but we cannot assure that this will be the case in any future clinical trials.

Generalized IRRs and other complications or side effects could harm further development and/or commercialization of our product candidates, including efzofitimod.

Additionally, our product candidates are designed to be administered by intravenous injection, which may cause side effects, including acute immune responses and injection site reactions.

The risk of adverse immune responses remains a significant concern for protein therapeutics, and we cannot assure that

these or other risks will not occur in any of our clinical trials our product candidates.

The risk of adverse immune responses remains a significant concern for protein therapeutics, and we cannot assure that these or other risks will not occur in any of our clinical trials our product candidates.

There is also a risk of delayed adverse events as a result of long-term exposure to protein therapeutics that must be administered repeatedly for the management of chronic conditions, such as the development of antibodies, which may occur over time.

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An alternative manufacturer would need to be qualified through a BLA supplement which could result in further delay.

regulatory agencies may also require additional studies if a new manufacturer is relied upon for commercial production.

The regulatory agencies may also require additional studies if a new manufacturer is relied upon for commercial production.

Switching manufacturers may involve substantial costs and is likely to result in a delay in our desired clinical and commercial timelines.

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In the EU, the EMA’s COMP grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention, or treatment of a life-threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the EU.

Additionally, designation is granted for products intended for the diagnosis, prevention, or treatment of a life-threatening, seriously debilitating or serious and chronic condition when, without incentives, it is unlikely that sales of the drug in the EU would be sufficient to justify the necessary investment in developing the drug or biological product or where there is no satisfactory method of diagnosis, prevention, or treatment, or, if such a method exists, the medicine must be of significant benefit to those affected by the condition.

in the EU would be sufficient to justify the necessary investment in developing the drug or biological product or where there is no satisfactory method of diagnosis, prevention, or treatment, or, if such a method exists, the medicine must be of significant benefit to those affected by the condition.

Orphan drug status confers up to ten years of marketing exclusivity in Europe, and up to seven years of marketing exclusivity in the United States, for a particular product in a specified indication.

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Accordingly, we and others with whom we work will need to continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, and quality control.

Any regulatory approvals that we receive for our product candidates may be subject to limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product candidate.

testing, including Phase 4 clinical trials, and surveillance to monitor the safety and efficacy of the product candidate.

If new safety issues emerge, we may be required to change our labeling.

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The development of therapeutic product candidates is expensive, and we expect our research and development expenses to fluctuate.

As of June 30, 2023, our cash, cash equivalents, restricted cash and available-for-sale investments were approximately $112.0 million.

As of September 30, 2023, our cash, cash equivalents, restricted cash and available-for-sale investments were approximately $105.6 million.

In February 2023, we completed an underwritten follow-on public offering of 23,125,000 shares of our common stock, including the partial exercise of the underwriters’

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We also received a $10.0 million milestone payment from the collaboration and license agreement (Kyorin Agreement) with Kyorin in February 2023.

In addition, during the six months ended June 30, 2023, we sold an aggregate of 4,332,210 shares of common stock at a weighted-average price of $2.29 per share for net proceeds of approximately $9.5 million under the Jefferies ATM Offering Program.

In addition, during the nine months ended September 30, 2023, we sold an aggregate of 5,846,099 shares of common stock at a weighted-average price of $2.19 per share for net proceeds of approximately $12.3 million under the Jefferies ATM Offering Program.

We believe that our current cash, cash equivalents, restricted cash and available-for-sale investments, will be sufficient to meet our material cash requirements for known contractual and other obligations for a period of at least one year from the date of this Quarterly Report.

However, our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through equity or debt offerings, grant funding, collaborations, strategic partnerships and/or licensing arrangements.

However, our operating plan may change as a result of many factors currently unknown

to us, and we may need to seek additional funds sooner than planned, through equity or debt offerings, grant funding, collaborations, strategic partnerships and/or licensing arrangements.

Our future funding requirements are difficult to forecast and will depend on many factors, including but not limited to:

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potential delays of our planned clinical trials of efzofitimod;

any resulting cost increases as a result of geopolitical and macroeconomic conditions, including the ongoing Ukraine-Russia conflict, outbreaks of contagious diseases (such as the COVID-19 pandemic), liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets , labor shortages, economic slowdowns, recessions or market corrections, inflation and monetary supply shifts, rising interest rates and tightening of credit markets ;

any resulting cost increases as a result of geopolitical and macroeconomic conditions, including the ongoing Ukraine-Russia conflict, the conflict in the Middle East, outbreaks of contagious diseases (such as the COVID-19 pandemic), liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets , labor shortages, economic slowdowns, recessions or market corrections, inflation and monetary supply shifts, rising interest rates and tightening of credit markets ;

the number and characteristics of product candidates that we pursue;

the scope, progress, results and costs of preclinical development, and clinical trials for other product candidates;

the manufacturing of preclinical study and clinical trial materials, including technology transfers to additional CDMOs, and any delays in the manufacturing of study drug as a result of geopolitical and macroeconomic conditions, including the ongoing Ukraine-Russia conflict, outbreaks of contagious diseases (such as the COVID-19 pandemic), liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets , labor shortages, economic slowdowns, recessions or market corrections, inflation, rising interest rates and tightening of credit markets ;

the manufacturing of preclinical study and clinical trial materials, including technology transfers to additional CDMOs, and any delays in the manufacturing of study drug as a result of geopolitical and macroeconomic conditions, including the ongoing Ukraine-Russia conflict, the conflict in the Middle East, outbreaks of contagious diseases (such as the COVID-19 pandemic), liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets , labor shortages, economic slowdowns, recessions or market corrections, inflation and monetary supply shifts, rising interest rates and tightening of credit markets ;

our ability to maintain existing and enter into new collaboration and licensing arrangements and the timing of any payments we may receive under such arrangements;

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The incurrence of indebtedness would result in fixed payment obligations and may require us to agree to certain restrictive covenants, such as limitations on our ability to incur debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.

As a result of geopolitical and macroeconomic conditions, including the ongoing Ukraine-Russia conflict, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets, the global credit and financial markets have experienced volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, inflation, rising interest rates and uncertainty about economic stability.

As a result of geopolitical and macroeconomic conditions, including the ongoing Ukraine-Russia conflict, the conflict in the Middle East, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets, the global credit and financial markets have experienced volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, inflation, rising interest rates and uncertainty about economic stability.

If the equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive.

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In response to the invasion, the United States, United Kingdom and European Union (EU), along with others, imposed significant new sanctions and export controls against Russia, Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future.

Ukraine-Russian conflict, which could conceivably expand into the surrounding region, remains uncertain;

The full economic and social impact of the sanctions imposed on Russia (as well as possible future punitive measures that may be implemented), as well as the counter measures imposed by Russia, in addition to the ongoing Ukraine-Russian conflict, which could conceivably expand into the surrounding region, remains uncertain;

however, both the conflict and related sanctions have resulted and could continue to result in disruptions to trade, commerce, pricing stability, credit availability and/or supply chain continuity in both Europe and globally, and has introduced significant uncertainty into global markets.

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and global financial markets and which has led to, and may continue to lead to, additional disruptions to trade, commerce, pricing stability, credit availability and supply chain continuity globally.

The ultimate long-term impact of the ongoing Ukraine-Russia conflict and other evolving geopolitical and macroeconomic conditions on our business is uncertain, although we continue to actively monitor the impact of these factors on our results of operations, financial condition and cash flows.

The ultimate long-term impact of the ongoing Ukraine-Russia conflict, the conflict in the Middle East, and other evolving geopolitical and macroeconomic conditions on our business is uncertain, although we continue to actively monitor the impact of these factors on our results of operations, financial condition and cash flows.

The extent of the impact of these factors on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, which are uncertain and cannot be predicted;

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We are a pre-commercial biotherapeutics company, and we have not yet generated any revenues from product sales.

We have incurred net losses in each year since our inception in 2005, including consolidated net losses of $24.3 million for the six months ended June 30 2023.

As of June 30, 2023, we had an accumulated deficit of $441.9 million.

We have incurred net losses in each year since our inception in 2005, including consolidated net losses of $35.6 million for the nine months ended September 30 2023.

As of September 30, 2023, we had an accumulated deficit of $453.3 million.

We have devoted most of our financial resources to research and development, including our clinical and preclinical development activities.

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continue our research and preclinical and clinical development of efzofitimod or any other product candidates that we may develop;

obtain clinical trial materials and further develop the manufacturing process for our product candidates;

obtain clinical trial materials and further develop the manufacturing

process for our product candidates;

seek regulatory approvals for our product candidates that successfully complete clinical trials;

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acquire or in-license other product candidates and technologies and collaborate with a third party on ATYR2810;

attract and retain

skilled personnel;

attract and retain skilled personnel;

and create additional infrastructure to support our operations as a public company and our product development and planned future commercialization efforts.

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It is possible that our collaborators may be unable to obtain regulatory approval of our product candidates or successfully market and commercialize any such products for which regulatory approval is obtained.

For example, while we have received $20.0 million in upfront and milestone payments from Kyorin to date, if Kyorin’s operations are limited as a result of geopolitical and macroeconomic conditions or other reasons, the development of efzofitimod in Japan may be significantly delayed and adversely affected, which may in turn delay or limit our receipt of any additional payments under the Kyorin Agreement.

payments under the Kyorin Agreement.

Other collaborators may not devote sufficient time or resources to the programs covered by these arrangements, and we may have limited or no control over the time or resources allocated by these collaborators to these programs.

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We do not have long-term contracts with our CDMOs, and our CDMOs may terminate their agreements with us for a variety of reasons including technical issues or our material breach of our obligations under the applicable agreement.

Furthermore, our CDMOs may reallocate resources away from the production of our product candidates if we delay manufacturing under certain circumstances, and the manufacturing facilities in which our product candidates are made could be adversely affected by earthquakes and other natural disasters, labor shortages, power failures, labor shortages, economic slowdowns, rising interest rates, inflation and monetary supply shifts, evolving geopolitical developments, such as the ongoing Ukraine-Russia conflict, and numerous other factors.

Furthermore, our CDMOs may reallocate resources away from the production of our product candidates if we delay manufacturing under certain circumstances, and the

manufacturing facilities in which our product candidates are made could be adversely affected by earthquakes and other natural disasters, labor shortages, power failures, labor shortages, economic slowdowns, rising interest rates, inflation and monetary supply shifts, evolving geopolitical developments, such as the ongoing Ukraine-Russia conflict, and numerous other factors.

If our CDMOs fail to meet contractual requirements, and we are unable to secure one or more replacement CDMOs capable of production at a substantially equivalent cost, our clinical development activities may be delayed, or we could lose potential revenue.

Manufacturing biologic drugs

is complicated and tightly regulated by the FDA and comparable regulatory authorities around the world, and although alternative CDMOs with the necessary manufacturing and regulatory expertise and facilities exist, it could be expensive and take a significant amount of time to arrange for alternative CDMOs, transfer manufacturing procedures to these alternative CDMOs, and demonstrate comparability of material produced by such new CDMOs.

Manufacturing biologic drugs is complicated and tightly regulated by the FDA and comparable regulatory authorities around the world, and although alternative CDMOs with the necessary manufacturing and regulatory expertise and facilities exist, it could be expensive and take a significant amount of time to arrange for alternative CDMOs, transfer manufacturing procedures to these alternative CDMOs, and demonstrate comparability of material produced by such new CDMOs.

New CDMOs of any product would be required to comply with applicable regulatory requirements.

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Our academic collaborators typically have rights to publish data, provided that we are notified in advance and may delay publication for a specified time in order to secure intellectual property rights to which we are entitled arising from the collaboration.

In other cases, publication rights are controlled exclusively by us, although in some cases we may share these rights with other parties.

In other cases, publication rights are controlled exclusively by us, although in some cases we may share

these rights with other parties.

We also conduct joint research and development programs that may require us to share trade secrets under the terms of our research and development partnerships or similar agreements.

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If the patent applications we own or have in-licensed that relate to our programs or product candidates do not issue as patents, if their breadth or strength of protection is threatened, or if they fail to provide exclusivity for our product candidates, it could dissuade companies from collaborating with us to develop product candidates, and threaten our ability to commercialize future products.

We cannot offer any assurances about which, if any, patents will issue, the breadth of any such patents or whether any issued patents will be found invalid and unenforceable or will be threatened by third parties.

We cannot offer any assurances about which, if any, patents will issue, the breadth of any such patents or whether any issued patents will

be found invalid and unenforceable or will be threatened by third parties.

Any successful opposition to these patents or any other patents owned by or licensed to us could deprive us of rights necessary for the successful commercialization of any product candidates that we may develop.

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Although various extensions may be available, the life of a patent, and the protection it affords, is limited.

Even if a patent does issue for any of our pending patent applications, possible delays in regulatory approvals could mean that the period of time during

which we could market a product candidate under patent protection could be reduced from what we generally would expect.

Even if a patent does issue for any of our pending patent applications, possible delays in regulatory approvals could mean that the period of time during which we could market a product candidate under patent protection could be reduced from what we generally would expect.

Since patent applications in the United States and most other countries are confidential for a period of time after filing, and some remain so until issued, we cannot be certain that we were the first to file any patent application related to a product candidate.

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For example, the FDA, as part of its Transparency Initiative, is currently considering whether to make additional information publicly available on a routine basis, including information that we may consider to be trade secrets or other proprietary information, and it is not clear at the present time how the FDA’s disclosure policies may change in the future, if at all.

If due to the effects on our operations of general political and economic conditions, including the ongoing Ukraine-Russia conflict, labor shortages, economic slowdowns, recessions or market corrections, inflation and monetary supply shifts, rising interest rates and tightening of credit markets resulting from the pandemic, the conflict or another cause, we are unable to generate new animal, or in vitro data, in time to support new, or updated patent application filings, or prior to patent conversion deadlines, it could materially impact the enforceability or scope of those patent filings.

If due to the effects on our operations of general political and economic conditions, including the ongoing Ukraine-Russia conflict, the conflict in the Middle East, labor shortages, economic slowdowns, recessions or market corrections, inflation and monetary supply shifts, rising interest rates and tightening of credit markets resulting from the pandemic, the conflict or another cause, we are unable to generate new animal, or in vitro data, in time to support new, or updated patent application filings, or prior to patent conversion deadlines, it could materially impact the enforceability or scope of those patent filings.

If we are unable to prevent material disclosure of the non-patented intellectual property related to our technologies to third parties, and there is no guarantee that we will have any such enforceable trade secret protection, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, results of operations and financial condition.

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In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents.

If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formed during the

manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire.

If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire.

Similarly, if any third-party patents are held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, the holders of any such patents may be able to block our ability to develop and commercialize the applicable product candidate unless we obtain a license or until such patent expires.

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Our existing license agreements impose, and we expect that future license agreements will impose, various diligence, milestone payment, royalty and other obligations on us.

If we fail to comply with our obligations under these agreements, or we are subject to a bankruptcy, the licensor may have the right to terminate the license, in which event we would not be able to market products covered by the license.

If we fail to comply with our obligations under these

agreements, or we are subject to a bankruptcy, the licensor may have the right to terminate the license, in which event we would not be able to market products covered by the license.

We may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates, and we have done so from time to time.

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We may also become involved in disputes with others regarding the ownership of intellectual property rights.

For example, we jointly develop intellectual property with certain parties, and disagreements may therefore arise as to the ownership of the intellectual property developed pursuant to these relationships.

For example, we jointly develop intellectual property

with certain parties, and disagreements may therefore arise as to the ownership of the intellectual property developed pursuant to these relationships.

If we are unable to resolve these disputes, we could lose valuable intellectual property rights.

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Because we have limited resources, we may forego or delay pursuit of certain strategic opportunities or opportunities with certain programs, product candidates or indications that later prove to have greater commercial potential.

We may focus on or pursue one indication over another potential indication and such development efforts may not be successful, which would cause us to delay the clinical development and approval of efzofitimod and other product candidates.

We may focus on or pursue one indication over another potential indication and such development efforts may not be successful, which would cause us to delay the

clinical development and approval of efzofitimod and other product candidates.

In addition, our decisions as to which of our discovery programs to advance into preclinical and clinical development could preclude us from advancing others.

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For example, based on analysis from an independent consultant that we engaged during 2022, we estimate that there is a $2-3 billion dollar market opportunity in ILD, including pulmonary sarcoidosis and SSc-ILD and excluding idiopathic pulmonary fibrosis.

Depending on the accuracy of this estimate, we may not be most efficiently allocating

resources toward the advancement of efzofitimod versus the advancement of other development efforts.

Depending on the accuracy of this estimate, we may not be most efficiently allocating resources toward the advancement of efzofitimod versus the advancement of other development efforts.

In addition, we may elect to pursue a research, clinical or commercial strategy that ultimately does not yield the results that we desire.

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unexpected changes in tariffs, trade barriers and regulatory requirements;

economic weakness, including labor shortages, economic slowdowns, recessions, inflation and monetary supply shifts, rising interest rates and tightening of credit markets, or political instability in particular foreign economies and markets, including as a result of the ongoing Ukraine-Russia conflict;

economic weakness, including labor shortages, economic slowdowns, recessions, inflation and

monetary supply shifts, rising interest rates and tightening of credit markets, or political instability in particular foreign economies and markets, including as a result of the ongoing Ukraine-Russia conflict;

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

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During the course of treatment, patients may suffer adverse events, including death, for reasons that may be related to our product candidates.

Such events could subject us to costly litigation, require us to pay substantial amounts of money to injured patients, delay, negatively impact or end our opportunity to receive or maintain regulatory approval to market our products, or require us to suspend or abandon our commercialization efforts.

Such events could subject

us to costly litigation, require us to pay substantial amounts of money to injured patients, delay, negatively impact or end our opportunity to receive or maintain regulatory approval to market our products, or require us to suspend or abandon our commercialization efforts.

Even in a circumstance in which we do not believe that an adverse event is related to our products, the investigation into the circumstance may be time-consuming or inconclusive.

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We collect, receive, store, process, use, generate, transfer, disclose, make accessible, protect and share (Process or Processing) personal data and other sensitive information, including information we or our third party partners (such as CROs and clinical trial sites) collect about patients and healthcare providers in connection with clinical trials necessary to operate our business.

Therefore, we are, or may become, subject to data privacy and security laws, regulations, rules, guidance, and industry standards as well as external and internal privacy and security policies, contractual requirements and other obligations that apply to the Processing of personal data both by us and on our behalf (collectively, Data Protection Requirements).

Therefore, our data processing activities subject us to numerous data privacy and security laws, regulations, rules, guidance, and industry standards as well as external and internal privacy and security policies, contractual requirements and other obligations that apply to the Processing of personal (and other sensitive) data both by us and on our behalf (collectively, Data Protection Requirements).

The number and scope of the Data Protection Requirements are changing, subject to differing applications and interpretations, and may be inconsistent between jurisdictions.

New Data Protection Requirements may be proposed or enacted.

Additionally, given the breadth and evolving nature of Data Protection Requirements, preparing for and complying with these requirements is rigorous, time-intensive and requires significant resources and a review of our technologies, systems and practices, as well as those of any third-party collaborators, service providers, contractors or consultants that Process personal data on our behalf.

Additionally, given the breadth and evolving nature of Data Protection Requirements (and consumers’

data privacy expectations), preparing for and complying with these requirements is rigorous, time-intensive and requires significant resources and a review of our technologies, systems and practices, as well as those of any third-party collaborators, service providers, contractors or consultants that Process personal data on our behalf.

We may at times fail (or be perceived to have failed) to do so.

Moreover, despite our efforts, our personnel or third parties upon whom we rely may fail to comply with such obligations, which could negatively impact our business operations and compliance posture.

If we or the third parties upon which we rely fail, or are perceived to have failed, to address or comply with Data Protection Requirements, this could result in government enforcement actions against us that could include investigations, fines, penalties, audits and inspections, additional reporting requirements and/or oversight, temporary or permanent bans on all or some Processing of personal data, orders to destroy or not use personal data.

Further, individuals or other relevant stakeholders could bring a variety of claims (including class claims and mass arbitration demands) against us for our actual or perceived failure to comply with the Data Protection Requirements.

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Any of these events could have a material adverse effect on our reputation, business, or financial condition, and could lead to a loss of actual or prospective customers, collaborators or partners;

interrupt or stop clinical trials;

interrupt or stop our clinical trials;

result in an inability to Process personal data or to operate in certain jurisdictions;

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or otherwise materially adversely affect our operations (each, a Material Adverse Impact).

In the United States, federal, state and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws and consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act).

In the United States, federal, state and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act).

and other similar laws (e.g.

wiretapping laws).

For example, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 (CPRA), (collectively, CCPA) applies to personal information of California consumers, business representatives, and employees, and requires businesses to provide specific disclosures in privacy notices and honor requests of California residents to exercise certain privacy rights.

For example, the California Consumer Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 (CPRA), (collectively, CCPA) applies to personal information of consumers, business representatives, and employees who are California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests of California residents to exercise certain privacy rights, such as those noted below.

The CCPA provides for administrative fines of up to $7,500 per violation and allows private litigants affected by certain data breaches to recover significant statutory damages.

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In addition, the CPRA expanded the CCPA’s requirements and established a regulatory agency to implement and enforce the law.

Other states, such as Virginia, Colorado, Utah and Connecticut, have also passed comprehensive privacy laws, and similar laws are being considered in several other states.

Other states, such as Virginia, Colorado, Utah and Connecticut, have also passed comprehensive privacy laws, and similar laws are being considered in several other states, as well as at the federal and local levels.

These state laws and the CCPA provide individuals with certain rights concerning their personal information, including the right to access, correct, or delete certain personal information, and opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making.

The exercise of these rights may impact our business and ability to provide our products and services.

While these states, like the CCPA, also exempt some data processed in the context of clinical trials, these developments may further complicate compliance efforts, and may increase legal risk and compliance costs for us and the third parties upon whom we rely.

In addition, data privacy and security laws have been proposed at the federal, state and local levels in recent years, which could further complicate compliance efforts.

Outside the United States, an increasing number of laws, regulations, and industry standards may govern data privacy and security.

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We may become subject to an increasing number of foreign privacy laws, particularly as we have begun to sponsor clinical trials in foreign jurisdictions, including in Europe.

The EU's General Data Protection Regulation (EU GDPR) and the United Kingdom’s GDPR (UK GDPR), regulate the collection and use of personal data in the European Economic Area (EEA) and the United Kingdom respectively.

The EU and UK GDPR impose strict requirements on controllers and processors of personal data, including special protections for “special categories of personal data”, which includes health and genetic information of individuals residing in the EA or in the United Kingdom (UK).

Failure to comply with the requirements of the EU and UK GDPR may result in warning letters, litigation, orders banning the processing of personal data, mandatory audits and financial penalties, including fines of up to 4% of the total worldwide annual turnover, or €20,000,000 (17,500,000 British Pounds under the UK GDPR), in either

case, whichever is greater;

For example, failure to comply with the requirements of the EU and UK GDPR may result in warning letters, litigation, orders banning the processing of personal data, mandatory audits and financial penalties, including fines of up to 4% of the total worldwide annual turnover, or €20,000,000 under the EU GDPR (17,500,000 British Pounds under the UK GDPR), in either case, whichever is greater;

or private litigation related to processing of personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.

Kyorin has also enrolled clinical trial patients in Japan and may be subject to local laws and regulations regarding data privacy, including the Act on the Protection of Personal Information.

As another example, the General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or LGPD) (Law No.

13,709/2018) may apply to our operations.

The LGPD broadly regulates processing personal data of individuals in Brazil and imposes compliance obligations and penalties comparable to those of the EU GDPR.

Kyorin has also enrolled clinical trial patients in Japan and may be subject to local laws and regulations regarding data privacy, including Japan’s Act on the Protection of Personal Information.

As another example, the LGPD broadly regulates processing personal data of individuals in Brazil and imposes compliance obligations and penalties comparable to those of the EU GDPR.

In the ordinary course of business, we may transfer personal data from Europe and other jurisdictions to the United States or other countries.

Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries.

In particular, the European Economic Area (EEA) and the UK have significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it generally believes are inadequate.

In particular, the EEA and the UK have significantly restricted the transfer of personal data to the United States and other countries whose privacy laws it generally believes are inadequate.

Other jurisdictions may adopt similarly stringent interpretations of their data localization and cross-border data transfer laws.

Although there are currently various mechanisms that may be used to transfer personal data from the EEA and UK to the United States in compliance with law, such as the EEA and UK’s standard contractual clauses, the UK’s International Data Transfer Agreement / Addendum, and the EU-U.S.

Data Privacy Framework (which allows for transfers for relevant U.S.-based organizations who self-certify compliance and participate in the Framework), these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States.

Data Privacy Framework and the UK extension thereto (which allows for transfers for relevant U.S.-based organizations who self-certify compliance and participate in the Framework), these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures to lawfully transfer personal data to the United States.

If there is no lawful manner for us to transfer personal data from the EEA, the UK, or other jurisdictions to the United States, or if the requirements for a legally-compliant transfer are too onerous, we could face significant adverse consequences, including the interruption or degradation of our operations, the need to relocate part of or all of our business or data processing activities to other jurisdictions (such as Europe) at significant expense, increased exposure to regulatory actions, substantial fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business.

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For example, the global financial crisis caused volatility and disruptions in the capital and credit markets.

In addition, due to general political and economic conditions, including the ongoing Ukraine-Russia conflict, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets, the global credit and financial markets have experienced extreme volatility and disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, inflation, rising interest rates and uncertainty about economic stability.

In addition, due to general political and economic conditions, including the ongoing Ukraine-Russia conflict, the conflict in the Middle East, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets, the global credit and financial markets have experienced extreme volatility and disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, inflation, rising interest rates and uncertainty about economic stability.

A severe or prolonged economic downturn, such as the global financial crisis, could result in a variety of risks to our business, including inability to raise additional capital when needed on acceptable terms, if at all.

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Earthquakes, droughts, floods, fires, hurricanes, disease epidemics or other natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition and prospects.

If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our facilities, that damaged critical infrastructure, such as the manufacturing facilities of our CDMOs and clinical sites utilized by our CROs, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time.

If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our

facilities, that damaged critical infrastructure, such as the manufacturing facilities of our CDMOs and clinical sites utilized by our CROs, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time.

The disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event.

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For example, a number of cancer drugs have been approved for reimbursement in the United States, but have not been approved for reimbursement in certain European countries.

There may be significant delays in obtaining reimbursement for newly approved medicines, and our inability to promptly obtain coverage and profitable payment rates from third-party payors for any approved medicines could have a material adverse effect on our business, prospects, financial condition and results of operations.

There may be significant delays in obtaining reimbursement for newly approved medicines, and our inability to promptly obtain coverage and profitable payment rates

from third-party payors for any approved medicines could have a material adverse effect on our business, prospects, financial condition and results of operations.

Outside the United States, international sales are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada, and other countries has and will continue to put pressure on the pricing and usage of our product candidates.

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Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits.

prices for medicines may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that currently restrict imports of medicines from countries where they may be sold at lower prices than in the United States.

Net prices for medicines may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that currently restrict imports of medicines from countries where they may be sold at lower prices than in the United States.

Moreover, increasing efforts by governmental and third-party payors, in the United States and abroad, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for new products and, as a result, they may not cover or provide adequate payment for our product candidates.

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Further, the IRA, among other things, (1) directs the HHS to negotiate the price of certain single-source drugs and biologics covered under Medicare and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation.

These provisions will take effect progressively starting in fiscal year 2023, although the Medicare drug price negotiation program is currently subject to legal challenges.

These provisions take effect progressively starting in fiscal year 2023.

On August 29, 2023, HHS announced the list of the first ten drugs that will be subject to price negotiations, although the Medicare drug price negotiation program is currently subject to legal challenges.

HHS has and will continue to issue and update guidance as these programs are implemented.

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The laws that may affect our ability to operate include:

the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or paying any remuneration (including any kickback, bribe or certain rebates), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part,

under federal and state healthcare programs such as Medicare and Medicaid.

A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

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trading volume of our common stock;

general political and macroeconomic conditions, including the ongoing Ukraine-Russia conflict, outbreaks of contagious diseases (such as the COVID-19 pandemic), liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets, and other geopolitical and macroeconomic conditions, including labor shortages, economic slowdowns, recessions, inflation and monetary supply shifts, rising interest rates and tightening of credit markets, and the resulting impacts on our business operations or financial condition.

general political and macroeconomic conditions, including the ongoing Ukraine-Russia conflict, the conflict in the Middle East, outbreaks of contagious diseases (such as the COVID-19 pandemic), liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, rising interest rates and financial and credit market fluctuations, volatility in the capital markets, and other geopolitical and macroeconomic conditions, including labor shortages, economic slowdowns, recessions, inflation and monetary supply shifts, rising interest rates and tightening of credit markets, and the resulting impacts on our business operations or financial condition.

In addition, companies trading in the stock market in general, and on the Nasdaq Capital Market and biotechnology companies in particular, have experienced extreme price and volume fluctuations, and we have in the past experienced volatility that has been unrelated or disproportionate to our operating performance.

From January 1, 2022 through August 4, 2023 the closing price of our common stock has ranged between $1.72 and $7.54 per share.

From January 1, 2022 through November 3, 2023 the closing price of our common stock has ranged between $1.20 and $7.54 per share.

Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.

Our executive officers, directors, 5% holders and their affiliates currently own a significant percentage of our stock and will be able to exert significant control over matters submitted to stockholders for approval .*

As of August 4, 2023, based on the latest information available to us, our executive officers, directors, holders known by us to own 5% of our voting stock and their affiliates own approximately 50.1% of our voting stock.

As of November 3, 2023, based on the latest information available to us, our executive officers, directors, holders known by us to own 5% of our voting stock and their affiliates own approximately 48.8% of our voting stock.

Therefore, our executive officers, directors, holders known by us to own 5% of our voting stock and their affiliates will have the ability to influence us through their ownership positions and may be able to determine all matters requiring stockholder approval.

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During 2022, we sold an aggregate of 1,421,627 shares of common stock at a weighted-average price of $3.09 per share for net proceeds of approximately $4.0 million under the Jefferies ATM Offering Program.

During the six months ended June, 2023, we sold an aggregate of 4,332,210 shares of common stock at a weighted-average price of $2.29 per share for net proceeds of approximately $9.5 million under the Jefferies ATM Offering Program.

During the nine months ended September 30, 2023, we sold an aggregate of 5,846,099 shares of common stock at a weighted-average price of $2.19 per share for net proceeds of approximately $12.3 million under the Jefferies ATM Offering Program.

These financing activities may have an adverse effect on our stockholders’

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presidential administration, Congress, or taxing authorities in other jurisdictions, including jurisdictions outside of the United States, could materially affect our tax obligations and effective tax rate.

To the extent that such changes have a

negative impact on us, including as a result of related uncertainty, these changes may adversely impact our business, financial condition, results of operations, and cash flows.

To the extent that such changes have a negative impact on us, including as a result of related uncertainty, these changes may adversely impact our business, financial condition, results of operations, and cash flows.

The amount of taxes we pay in different jurisdictions depends on the application of the tax laws of various jurisdictions, including the United States, to our international business activities, tax rates, new or revised tax laws, or interpretations of tax laws and policies, and our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements.

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malicious code (such as viruses and worms);

denial-of-service attacks (such as credential stuffing);

denial-of-service attacks;

credential stuffing;

credential harvesting;

advanced persistent threat intrusions;

malware (including as a result of advanced persistent threat intrusions;

natural disasters;

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social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks);

server malfunction;

server malfunctions;

software or hardware failures;

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loss of data or other computer assets;

attacks enhanced or facilitated by AI;

and other similar issues.

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Additionally, remote work has become more common and has increased the risk to our information technology assets and data, as more of our employees utilize network connections, computers and devices outside of our premises and networks, including working at home, while in transit and public locations.

Additionally, future or past business transactions could expose us to additional risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’

Additionally, future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’

systems and technologies.

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Therefore, such vulnerabilities could be exploited but may not be detected until after a security incident has occurred.

These vulnerabilities pose material risk to our business.

Unremediated high risk or critical vulnerabilities pose material risk to our business.

Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities.

Furthermore, applicable Data Protection Requirements may require us to notify relevant stakeholders of security breaches.

Furthermore, applicable Data Protection Requirements may require us to notify relevant stakeholders of security incidents.

Such disclosures are costly, and the disclosures or the failure to comply with such requirements could lead to Material Adverse Impacts.

If we, our service providers, partners or other relevant third parties have experienced or in the future experience any security incident(s), it may result in a Material Adverse Impact.

If we or the third parties upon which we rely experience or in the future experience (or are perceived to have experienced) any security incident(s), we could suffer reputational harm, face litigation or adverse regulatory actions, fines, other penalties, audits, inspections, additional reporting requirements and/or oversight, restrictions on Processing Sensitive Information, indemnification obligations, negative publicity, business interruptions, and diversion of funds.

For example, the loss of data from completed clinical trials for our product candidates could result in delays in our regulatory approval efforts and significantly increase our costs.

Theft of our Sensitive Information could require substantial expenditures to remedy.

If we or the third parties upon which we rely experience a security incident, we could suffer reputational harm or face litigation or adverse regulatory action, fines, other penalties, business interruption, and diversion of funds.

As a result, we could experience Material Adverse Impacts.

Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations.

actions or Material Adverse Impacts arising out of our Processing operations, privacy and security practices, or security breaches we may experience.

Furthermore, we cannot be sure that our insurance coverage, will be adequate or otherwise protect us from or adequately mitigate liabilities or damages with respect to claims, costs, expenses, litigation, fines, penalties, business loss, data loss, regulatory actions or Material Adverse Impacts arising out of our Processing operations, privacy and security practices, or security incidents we may experience.

The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of large excess or deductible or co-insurance requirements), could have a Material Adverse Impact.

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In addition, pending their use, we may invest our existing cash in certain short-term investments, including but not limited to investment-grade, interest-bearing securities.

Historically,

investment in these securities has been highly liquid and has experienced only very limited defaults.

Historically, investment in these securities has been highly liquid and has experienced only very limited defaults.

However, volatility in the financial markets in recent years has created additional uncertainty regarding the liquidity and safety of these investments.

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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-Q

Item 1A. Risk Factors