What changed in this filing

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Item 1A. Risk Factors

2024-08-13 compared with 2024-05-02 · 74 added, 70 removed, 1059 unchanged (12% of the section changed)

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Clinical trials are expensive, time-consuming, often delayed and uncertain as to outcome.

We cannot guarantee that our ongoing or planned clinical trials will be initiated or conducted as planned or completed on schedule, if at all.

We cannot guarantee that our ongoing clinical trials, including our EFZO-FIT study and our Phase 2 study in systemic sclerosis (SSc, also known as scleroderma) associated-interstitial lung disease (ILD) (SSc-ILD) (the EFZO-CONNECT study), or planned clinical trials will be initiated or conducted as planned or completed on schedule, if at all.

We cannot assure you that our product candidates will not be subject to new clinical holds or significant delay in the future.

For example, 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 and our Phase 2 study in systemic sclerosis (SSc also known as scleroderma) associated-interstitial lung disease (ILD) (SSc-ILD) (the EFZO-CONNECT study) or future clinical trials.

Any inability to initiate or complete clinical trials of our product candidates in the United States, as a result of clinical holds or otherwise, would delay our clinical development plans, may require us to incur additional clinical development costs and could impair our ability to obtain U.S.

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Certain of the conditions for which we may elect to evaluate our product candidates may be rare diseases with limited patient pools from which to draw for clinical trials.

For example, we are conducting the EFZO-FIT study in patients with pulmonary sarcoidosis.

While estimates of pulmonary sarcoidosis prevalence vary, we estimate that pulmonary sarcoidosis affects an estimated 200,000 patients in the United States.

Of that population, however, we estimate that approximately 70% experience symptomatic disease such that our targeted population is smaller.

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

For example, if patients have been previously prescribed certain other medications to treat pulmonary sarcoidosis or if they have not been on steroids for a certain period of time, 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.

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, our clinical trials.

For example, we are conducting the EFZO-CONNECT study in patients with SSc-ILD, where it is estimated that approximately 100,000 people in the United States are affected by SSc and up to 80% may develop ILD.

In addition to the limited potential patient population, the eligibility criteria may further limit the pool of available participants in the EFZO-CONNECT study.

Once enrolled, patients may decide or be required to discontinue from the clinical trial due to inconvenience, burden of trial requirements, adverse events associated with efzofitimod, limitations required by trial protocols or other reasons.

Additionally, we are conducting the EFZO-CONNECT study in patients with SSc-ILD.

It is estimated that approximately 100,000 people in the United States are affected by SSc and up to 80% may develop ILD.

Our ability to identify, recruit, enroll and maintain a sufficient number of patients, or those with required or desired characteristics to achieve diversity in our clinical trials in a timely manner may also be affected by other factors, including, but not limited to:

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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.

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.

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 has not been studied extensively, nor has the safety of this class of protein therapeutics been evaluated extensively in humans.

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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.

Further, based on the discovery of the involvement of neuropilin-2 (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.

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This randomized, double-blind, placebo-controlled study investigated the safety, tolerability, immunogenicity, and pharmacokinetics (PK) of intravenous efzofitimod in 36 healthy volunteers.

In addition, we or our third party collaborators may choose to conduct additional clinical trials for

efzofitimod in countries outside the United States, subject to applicable regulatory approval.

In addition, we or our third party collaborators may choose to conduct additional clinical trials for efzofitimod in countries outside the United States, subject to applicable regulatory approval.

For example, our partner, Kyorin Pharmaceutical Co., Ltd.

(Kyorin), conducted and funded an efzofitimod Phase 1 clinical trial in 32 healthy Japanese male volunteers and is participating in the EZFO-FIT study.

We are enrolling subjects in the EZFO-FIT study in centers in the United States, Europe and Brazil and Kyorin is enrolling subjects in the EZFO-FIT study in centers in Japan.

In July 2024, we completed enrollment of the EFZO-FIT study with a total of 268 subjects in centers in the United States, Europe, Brazil, as well as centers in Japan where our partner Kyorin led the enrollment effort.

Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of such study data is generally subject to certain conditions.

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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 you 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 you that these or other risks will not occur in any clinical trials for 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.

If any such adverse events occur, which may include the development of a negative autoimmune response from antibodies or the occurrence of IRRs associated with antibodies, further advancement of our clinical trials could be halted or delayed, which would have a material adverse effect on our business, prospects, financial condition and results of operations.

trials could be halted or delayed, which would have a material adverse effect on our business, prospects, financial condition and results of operations.

If one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects or other safety concerns caused by such products, a number of potentially significant negative consequences could result.

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The process of manufacturing biologics is extremely susceptible to product loss due to contamination, equipment failure or improper installation or operation of equipment, or vendor or operator error.

Even minor deviations from normal manufacturing and distribution processes for any of our product candidates could result in reduced production yields, product defects, and other supply disruptions.

Even minor deviations

from normal manufacturing and distribution processes for any of our product candidates could result in reduced production yields, product defects, and other supply disruptions.

Furthermore, although tRNA synthetases represent a class of proteins that may share immunomodulatory properties in various physiological pathways, each tRNA synthetase has a different structure and may have unique manufacturing requirements that are not applicable across the entire class.

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Furthermore, marketing exclusivity in Europe can be reduced from ten years to six years if the initial designation criteria have significantly changed since the market authorization of the orphan product.

Even if we are the first to obtain marketing authorization for an orphan drug indication, there are circumstances under which a competing product may be approved for the same indication during the period of marketing exclusivity, such as if the later product is shown to be clinically superior to the orphan product, or if the later product is deemed a different product than ours.

Even if we are the first to obtain marketing authorization for an orphan drug indication, there are circumstances under which a

competing product may be approved for the same indication during the period of marketing exclusivity, such as if the later product is shown to be clinically superior to the orphan product, or if the later product is deemed a different product than ours.

Further, the marketing exclusivity would not prevent competitors from obtaining approval of the same product candidate as ours for indications other than those in which we have been granted orphan drug designation, or for the use of other types of products in the same indications as our orphan product.

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Accordingly, even if we believe a particular product candidate is eligible for breakthrough therapy or Fast Track designation, we cannot assure you that the FDA would decide to grant it.

Even if we receive breakthrough therapy or Fast Track

designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures.

Even if we receive breakthrough therapy or Fast Track designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures.

The FDA may withdraw breakthrough therapy or Fast Track designation if it believes that the product no longer meets the qualifying criteria.

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In the United States, engaging in impermissible promotion of our products for off-label uses can also subject us to false claims litigation under federal and state statutes, which can lead to civil and criminal penalties and fines, agreements that would materially restrict the manner in which we promote or distribute our drug products and exclusion from Medicare, Medicaid and other federal and state healthcare programs.

These false claims statutes include the federal False Claims Act, which allows any individual to bring a lawsuit against a pharmaceutical company on behalf of the federal government alleging submission of false or fraudulent claims, or causing to present such false or fraudulent claims, for payment by a federal program such as Medicare or Medicaid.

These false claims statutes include the federal False Claims Act, which allows any individual to

bring a lawsuit against a pharmaceutical company on behalf of the federal government alleging submission of false or fraudulent claims, or causing to present such false or fraudulent claims, for payment by a federal program such as Medicare or Medicaid.

If the government prevails in the lawsuit, the individual will share in any fines or settlement funds.

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An unsuccessful post-marketing study or failure to complete such a trial could result in the withdrawal of marketing approval.

If a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of a product, such regulatory agency may impose restrictions on that product or us, including requiring withdrawal of the product from

If we fail to comply with applicable regulatory requirements, a regulatory agency or enforcement authority may, among other things:

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

As of March 31, 2024, our cash, cash equivalents, restricted cash and available-for-sale investments were approximately $87.7 million.

As of June 30, 2024, our cash, cash equivalents, restricted cash and available-for-sale investments were approximately $81.4 million.

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.

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• cost increases related to the manufacturing of preclinical study and clinical trial materials, including cost increases related to technology transfers to additional CDMOs and any delays in the manufacturing of study drug;

• cost increases as a result of global geopolitical tension, armed conflicts, potential future health pandemics, liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, higher 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 and tightening of credit markets;

labor shortages, economic slowdowns, recessions or market corrections, inflation and monetary supply shifts and tightening of credit markets;

• the number and characteristics of product candidates that we pursue;

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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, 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 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 timeframe, 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 $15.5 million for the three months ended March 31, 2024.

As of March 31, 2024, we had an accumulated deficit of $483.5 million.

We have incurred net losses in each year since our inception in 2005, including consolidated net losses of $31.8 million for the six months ended June 30, 2024.

As of June 30, 2024, we had an accumulated deficit of $499.8 million.

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

To date, we have financed our operations primarily through the sale of equity securities and convertible debt and through venture debt, term loans and license and collaboration agreement revenues.

The amount of our future net losses will depend, in part, on

the rate of our future expenditures and our ability to obtain funding through equity offerings, grant funding, collaborations, strategic partnerships and/or licensing arrangements.

The amount of our future net losses will depend, in part, on the rate of our future expenditures and our ability to obtain funding through equity offerings, grant funding, collaborations, strategic partnerships and/or licensing arrangements.

We have not completed registrational clinical trials for any product candidate to date and it will be several years, if ever, before we have a product candidate ready for commercialization.

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Our sole source of revenue depends upon the performance by these collaborators of their responsibilities under these arrangements.

receive these payments will depend on Kyorin’s development and commercialization of efzofitimod in Japan, over which we have limited control.

For example, while we are eligible to receive up to an additional $155.0 million in milestone payments under the Kyorin Agreement, as well as tiered royalties ranging from the mid-single digits to mid-teens on any net sales in Japan, whether and when we receive these payments will depend on Kyorin’s development and commercialization of efzofitimod in Japan, over which we have limited control.

The development efforts of our collaborators are subject to the same risks and uncertainties described above with respect to our independently developed product candidates.

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For example, there is no assurance that we were the first to invent or the first to file patent applications in respect of the inventions claimed in our patent applications or that our patent applications claim patentable subject matter.

We may also be unaware

of potentially relevant prior art relating to our patents and patent applications, and this prior art, if any, may be used by third parties as grounds to seek to invalidate a patent or to prevent a patent from issuing from a pending patent application.

We may also be unaware of potentially relevant prior art relating to our patents and patent applications, and this prior art, if any, may be used by third parties as grounds to seek to invalidate a patent or to prevent a patent from issuing from a pending patent application.

Even if patents do successfully issue and even if such patents disclose aspects of our product candidates, third parties may challenge their validity, enforceability or scope, which may result in such patents being narrowed or invalidated.

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We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems, but it is possible that these security measures could be breached.

Although we expect all of our employees and consultants to assign their inventions to us, and all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed or that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.

confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed or that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.

For example, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches.

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Even if patents covering our product candidates are obtained, once the patent life has expired, we may be open to competition from competitive products, including generics or biosimilars.

Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized.

Given the amount of time required for the

development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized.

As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

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Such an outcome could have a material adverse effect on our business.

Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

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The USPTO is developing regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, were enacted March 16, 2013.

Although it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.

our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.

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

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In response to competition, higher rates of inflation and labor shortages, we may need to adjust employee cash compensation, which would affect our operating costs and our margins, or equity compensation, which would affect our outstanding share count and cause dilution to existing stockholders.

We may not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for individuals with similar skill sets.

We may not be able to attract and retain personnel on acceptable terms given the competition

among numerous pharmaceutical and biotechnology companies for individuals with similar skill sets.

In addition, the available pool of skilled employees may be further reduced if immigration laws change in a manner that increases restrictions on immigration.

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In addition, internal restructurings can require a significant amount of time and focus from management and other employees, which may divert attention from commercial operations.

If any internal restructuring activities we have undertaken or undertake in the future fail to

achieve some or all of the expected benefits therefrom, our business, results of operations and financial condition could be materially and adversely affected.

If any internal restructuring activities we have undertaken or undertake in the future fail to achieve some or all of the expected benefits therefrom, our business, results of operations and financial condition could be materially and adversely affected.

We are subject to a variety of risks associated with international operations that could materially adversely affect our business.*

We currently conduct research activities through Pangu BioPharma Limited, in collaboration with the Hong Kong University of Science and Technology.

We currently conduct certain research activities through Pangu BioPharma Limited, in collaboration with the Hong Kong University of Science and Technology.

Additionally, we have conducted clinical trials in the EU and in Australia and may conduct future clinical trials internationally.

Our partner, Kyorin, conducted and funded an efzofitimod Phase 1 clinical trial in healthy volunteers in Japan, and has joined the EFZO-FIT study, a global Phase 3 clinical trial designed to enroll up to 264 subjects at multiple centers in United States, Europe, Brazil and Japan.

Our partner, Kyorin, conducted and funded an efzofitimod Phase 1 clinical trial in healthy volunteers in Japan, and has joined the EFZO-FIT study, a global Phase 3 clinical trial in which we have enrolled 268 subjects at multiple centers in United States, Europe, Brazil and Japan.

If any of our product candidates are approved for commercialization outside of the United States, we expect to either use our own sales organization or selectively enter into agreements with third parties to market our products on a worldwide basis or in more limited geographical regions, as with Kyorin and efzofitimod in Japan.

We are, and we expect that we will continue to be, subject to a variety of risks related to international operations, including, but not limited to:

liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets, different regulatory requirements for approval of drugs and biologics in foreign countries;

liquidity concerns at, and failures of, banks and other financial institutions or other disruptions in the banking system or financing markets;

different regulatory requirements for approval of drugs and biologics in foreign countries;

reduced or uncertain protection for intellectual property;

unexpected changes in tariffs, trade barriers and regulatory requirements;

economic weakness, including labor shortages, economic slowdowns, recessions, inflation and monetary supply shifts, higher interest rates and tightening of credit markets, or political instability in particular foreign economies and markets, including global geopolitical tension and armed conflicts;

economic weakness, including labor shortages, economic slowdowns, recessions, inflation, monetary supply shifts, higher interest rates and tightening of credit markets;

political instability in particular foreign economies and markets, including global geopolitical tension and armed conflicts;

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

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New Data Protection Requirements may be proposed or enacted.

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 with whom we work.

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 with whom we work.

We may at times fail (or be perceived to have failed) in our efforts to comply with our Data Protection Requirements.

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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’s standard contractual clauses, the UK’s International Data Transfer Agreement / Addendum, and the EU-U.S.

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.

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 third parties, and injunctions against our processing or transferring of personal data necessary to operate our business.

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For example, certain privacy laws, such as the EU and UK GDPR and the CCPA, may require our customers to impose specific contractual restrictions on their service providers.

publish privacy policies, marketing materials and other statements, such as compliance with certain certifications, regarding data privacy and security.

We also publish privacy policies, marketing materials and other statements, such as compliance with certain certifications, regarding data privacy and security.

If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences.

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In order to market our product candidates, if approved by the FDA or any other regulatory body, we must build our sales, marketing, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services.

There are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements with third parties to perform these services.

There are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements with third parties to perform

these services.

For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch.

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The insurance coverage and reimbursement status of newly-approved products is uncertain.

Failure to obtain or maintain adequate coverage and reimbursement for new or current products could limit our ability to market those products and decrease our ability to generate revenue.*

Failure to obtain or maintain adequate coverage and reimbursement for new or current products, if approved, could limit our ability to market those products and decrease our ability to generate revenue.*

The availability and extent of coverage and adequate reimbursement by third-party payors, including government health administration authorities, private health coverage insurers, managed care organizations and other third-party payors is essential for most patients to be able to afford expensive treatments.

Sales of any of our product candidates that receive marketing approval will depend substantially, both in the United States and internationally, on the extent to which the costs of such product candidates will be

covered and reimbursed by third-party payors.

If reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize our product candidates.

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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.

For example, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the ACA) was passed in March 2010, and substantially changed the way healthcare is financed by both governmental and private insurers.

For example, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the ACA) was passed in March 2010, and substantially

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

There have been executive, judicial and congressional challenges to certain aspects of the ACA.

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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.

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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health plans, healthcare clearinghouses and certain healthcare providers, as well as their business associates and covered subcontractors that perform certain services for or on their behalf involving the use or disclosure of individually identifiable health information;

information related to certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members;

federal legislation commonly referred to as Physician Payments Sunshine Act, enacted as part of the ACA, and its implementing regulations, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to the CMS information related to certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other healthcare professionals (such as physician assistants and nurse practitioners), and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members;

• analogous state and foreign laws and regulations.

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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, 2023 through April 30, 2024 the closing price of our common stock has ranged between $1.11 and $2.57 per share.

From January 1, 2023 through August 9, 2024 the closing price of our common stock has ranged between $1.11 and $2.57 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 April 30, 2024, 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 37.7% of our voting stock.

As of August 9, 2024, 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 27.0% 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 2023, we sold an aggregate of 10,530,795 shares of common stock at a weighted-average price of $1.82 per share for net proceeds of approximately $18.4 million under the Jefferies ATM Offering Program.

During the three months ended March 31, 2024, we sold an aggregate of 5,045,518 shares of common stock at a weighted-average price of $1.79 per share for net proceeds of approximately $8.6 million under the Jefferies ATM Offering Program of which $0.8 million was included in accounts receivable as of March 31, 2024.

During the six months ended June 30, 2024, we sold an aggregate of 12,448,319 shares of common stock at a weighted-average price of $1.77 per share for net proceeds of approximately $21.3 million under the Jefferies ATM Offering Program.

These financing activities may have an adverse effect on our stockholders’ rights, the market price of our common stock and on our operations, and may require us to relinquish rights to some of our technologies, intellectual property or product candidates, issue additional equity or debt securities, or otherwise agree to terms unfavorable to us.

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There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs or other unforeseen reasons, portions of our existing NOLs could expire or otherwise be unavailable to reduce future income tax liabilities, including for state tax purposes.

For example, California imposed limits on the usability of California state net operating losses to offset taxable income in tax years beginning after 2023 and before 2027.

For these reasons, we may not be able to utilize a material portion of our NOLs, even if we attain profitability, which could potentially result in increased future tax liability to us and could adversely affect our operating results and financial condition .

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We use third parties, including service providers and subprocessors, to help us operate our business and engage in Processing or otherwise share Sensitive Information with our partners or other third parties in conjunction with our business.

These third parties and

their technologies operate critical business systems to Process Sensitive Information in a variety of contexts, including, without limitation, cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, and other functions.

These third parties and their technologies operate critical business systems to Process Sensitive Information in a variety of contexts, including, without limitation, cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, and other functions.

Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information security measures in place.

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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.

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, data privacy and security practices, or security incidents 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, data 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.

6 unchanged sentences

Although we have adopted a code of business conduct and ethics that includes provisions governing the interactions of employees with government entities to mitigate these risks, there can be no assurance that this will be successful in preventing violations of anti-corruption laws.

could harm our reputation and have a material adverse effect on our business, financial condition, results of operations and prospects.

If we are not in compliance with anti-corruption laws and other laws governing the conduct of business with government entities (including local laws), we may be subject to criminal and civil penalties and other remedial measures, which could harm our reputation and have a material adverse effect on our business, financial condition, results of operations and prospects.

Any investigation of any actual or alleged violations of such laws could also harm our reputation or have an adverse impact on our business, prospects, financial condition and results of operations.

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If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business and cause our stock price to decline.

We have broad discretion in the use of our cash, cash equivalents, restricted cash and available-for-sale investments and are exposed to risks related to the marketable securities we may purchase.

We have considerable discretion in the application of our existing cash, cash equivalents, restricted cash and available-for-sale investments.

We have broad discretion in the use of our cash, cash equivalents and available-for-sale investments and are exposed to risks related to the marketable securities we may purchase.*

We have considerable discretion in the application of our existing cash, cash equivalents and available-for-sale investments.

We expect to use our existing cash to fund research and development activities and for working capital and general corporate purposes, including funding the costs of operating as a public company.

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.

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.

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

Additionally, we may use this cash, cash equivalents, restricted cash and available-for-sale investments for purposes that do not yield a significant return or any return at all for our stockholders.

Additionally, we may use this cash, cash equivalents and available-for-sale investments for purposes that do not yield a significant return or any return at all for our stockholders.

Unregistered Sales of Equity Securities and Use of Proceeds

Defaults Upon Senior Securities

Mine Safety Disclosure

Mine Safety Disclosure s

Not applicable.

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