What changed in this filing

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Item 1A. Risk Factors

2020-08-13 compared with 2020-05-12 · 145 added, 142 removed, 931 unchanged (24% of the section changed)

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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, 2020, our cash, cash equivalents and available-for-sale investments were approximately $49.8 million.

We believe that our existing cash, cash equivalents and available-for-sale investments as of March 31, 2020, will be sufficient to meet our anticipated cash requirements for a period of at least one year from the filing date of this Quarterly Report on Form 10-Q.

As of June 30, 2020, our cash, cash equivalents and available-for-sale investments were approximately $41.4 million.

We believe that our existing cash, cash equivalents and available-for-sale investments as of June 30, 2020, will be sufficient to meet our anticipated cash requirements for a period of at least one year from the filing date of this Quarterly Report on Form 10-Q.

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 will depend on many factors, including but not limited to:

our ability to initiate, and the progress and results of, our current clinical trials of ATYR1923;

our ability to initiate, and the progress and results of, our clinical trials of ATYR1923;

delays of our current clinical trials of ATYR1923 and any resulting cost increases as a result of the COVID-19 pandemic;

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The sale of additional equity or convertible securities would cause dilution to all of our stockholders.

The incurrence of additional indebtedness would increase our fixed payment obligations and may require us to agree to certain restrictive covenants, such as limitations on our ability to incur additional 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 the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have recently experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability.

The incurrence of additional indebtedness would increase our

fixed payment obligations and may require us to agree to certain restrictive covenants, such as limitations on our ability to incur additional 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 the COVID-19 pandemic and actions t aken to slow its spread, the global credit and financial markets have experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases i n unemployment 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.

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

In addition, any fundraising efforts may divert o ur management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates.

We may decide to enter into additional strategic partnerships, including collaborations with pharmaceutical and biotechnology companies, to enhance and accelerate the development and potential commercialization of our product candidates.

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We have debt that may cause risks that could adversely affect our business, operating results and financial condition.

As of March 31, 2020, our Term Loans consisted of $5.3 million principal outstanding to be repaid ratably, on a monthly basis, through November 2020.

As of June 30, 2020, our Term Loans consisted of $3.3 million principal outstanding to be repaid ratably, on a monthly basis, through November 2020.

In addition, we have a $1.8 million final payment due in November 2020.

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The material adverse change clause covers a material impairment in the perfection or priority of the Lenders’ lien in the underlying collateral or in the value of such collateral, material adverse change in our business operations or condition or material impairment of our prospects for repayment of any portion of the remaining debt obligation.

The operating restrictions and covenants in the Loan Agreement, as well as any future financing agreements that we may enter into, may restrict our ability to finance our operations, engage in business activities or expand or fully pursue our business strategies.

Our ability to comply with these covenants may be affected by events beyond our control and we may not be able to meet those covenants.

The operating restrictions and covenants in the Loan Agreement, as well as any future financing agreements that we may enter into, may r estrict our ability to finance our operations, engage in business activities or expand or fully pursue our business strategies.

Our ability to comply with these covenants may be affected by events beyond our control and we may not be able to meet those cov enants.

A breach of any of the covenants under the Loan Agreement could result in a default under the Loan Agreement, which could cause all of the outstanding indebtedness under the Term Loans to become immediately due and payable.

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We are a clinical stage biotherapeutics company, and we have not yet generated any revenues from product sales.

Other than the net income generated in the three months ended March 31, 2020, we have incurred net losses since our inception in 2005, including condensed consolidated net income (loss) of $1.8 million and $(6.1) million for the three months ended March 31, 2020 and 2019, respectively.

As of March 31, 2020, we had an accumulated deficit of $320.6 million.

Other than the net income generated in the three months ended March 31, 2020, we have incurred net losses since our inception in 2005, including condensed consolidated loss of $4.7 million and $12.0 million for the six months ended June 30, 2020 and 2019, respectively.

As of June 30, 2020, we had an accumulated deficit of $327.0 million.

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

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ultimately establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

seek to identify

and validate additional product candidates;

seek to identify and validate additional product candidates;

maintain, protect and expand our intellectual property portfolio;

acquire or in-license other produc t candidates and technologies;

acquire or in-license other product candidates and technologies;

attract and retain skilled personnel;

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be subject to changes in the way the product is manufactured or administered;

have regulatory authorities withdraw their approval of the product or impose restrictions on its distribution in the form of a modified risk evaluation and mitigation strategy (REMS);

have regulatory authorities withdraw their approval of

the product or impose restrictions on its distrib ution in the form of a modified risk evaluation and mitigation strategy (REMS);

be subject to litigation;

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Further, if patients drop out of our trials, miss scheduled doses or follow-up visits or otherwise fail to follow trial protocols, or if our trials are otherwise disputed due to COVID-19 or actions taken to slow its spread, 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 has impacted clinical trials broadly, including our own with many sites pausing enrollment and patients choosing not to enroll or continue participating in ongoing trials.

In addition, the COVID-19 pandemic has impacted clinical trials broadly, including our ATYR1923 Phase 1b/2a trial in patients with pulmonary sarcoidosis, with many sites pausing enrollment and patients choosing not to enroll or continue participating in ongoing trials.

While the majority of such sites are now continuing enrollment and trial activities, the availability of top-line results from the clinical trial is delayed.

We may experience delays in site initiation and patient enrollment, failures to comply with study protocols, delays in the manufacture of product candidates for clinical testing and other difficulties in starting or completing our clinical trials due to the COVID-19 pandemic.

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

Top-line data also remain subject

to audit and verification procedures that may result in the final data being materially different from the preliminary data we pr eviously published.

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

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

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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 ATYR1923, or experience significant delays in doing so, our business will be materially harmed.

To date, we have expended significant time, resources and effort on the discovery and development of product candidates related to the extracellular proteins derived from the HARS family (Resokine pathway) and NRP2 biology, including conducting preclinical studies and clinical trials.

To date, we have expended significant time, resources and effort on the discovery and development of product candidates related to the extracellular proteins derived from the HARS family and NRP2 biology, including conducting preclinical studies and clinical trials.

We have not yet commenced or completed any evaluation of our product candidates in human clinical trials designed to demonstrate efficacy to the satisfaction of the FDA.

Before we can market or sell our therapeutic candidates in the United States or foreign jurisdictions, we will need to commence and complete additional clinical trials (including larger, pivotal trials, which we have not yet commenced), manage clinical and manufacturing activities, obtain necessary regulatory approvals from the FDA in the United States and from similar regulatory authorities in other jurisdictions, obtain adequate clinical and commercial manufacturing supplies, build commercial capabilities, which may include entering into a marketing collaboration with a third party, and in some jurisdictions, obtain reimbursement authorization, among other things.

We cannot assure you that we will be able to successfully complete the necessary clinical trials, obtain regulatory approvals, secure an adequate commercial supply for, or otherwise successfully commercialize our therapeutic candidates.

States and from similar regulatory authorities in other jurisdictions, obtain adequate clinical and commercial manufacturing supplies, build commercial capabilities, which may include entering into a marketing collaboration with a third party, and in some jurisdictions, obtain reimbursement authorization, among other things.

We cannot assure you that we will be able to successfully complete the necessary clinical trials, obtain regulatory approvals, secure an adequate commercial supply for, or other wise successfully commercialize our therapeutic candidates.

If we do not receive regulatory approvals for our product candidates, and even if we do obtain regulatory approvals, we may never generate significant revenues, if any, from commercial sales.

If we fail to successfully commercialize our therapeutic candidates, we may be unable to generate sufficient revenues to sustain and grow our company, and our business, prospects, financial condition and results of operations will be adversely affected.

If w e fail to successfully commercialize our therapeutic candidates, we may be unable to generate sufficient revenues to sustain and grow our company, and our business, prospects, financial condition and results of operations will be adversely affected.

We have encountered and may continue to encounter delays and difficulties enrolling patients in our clinical trials for a variety of reasons, including the limited number of patients who have the diseases for which certain of our product candidates are being studied, which could delay or halt the clinical development of our product candidates.

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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.

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 ATYR1923, limitations required by trial

protocols or other reasons.

In addition, the COVID-19 pandemic has impacted patient enrollment in our ATYR1923 Phase 1b/2a clinical trial.

A ccording to the Centers for Disease Control and Prevention, people who have serious chronic medical conditions, including lung disease, are at higher risk of getting very sick from COVID-19.

In addition, the COVID-19 pandemic has impacted patient enrollment in our ATYR1923 Phase 1b/2a clinical trial in patients with pulmonary sarcoidosis.

According to the Centers for Disease Control and Prevention, people who have serious chronic medical conditions, including lung disease, are at higher risk of getting very sick from COVID-19.

As a result, current or potential patients in our ongoing Phase 1b/2a clinical trial may choose to not enroll, not participate in follow-up clinical visits or drop out of the trial as a precaution against contracting COVID-19.

Further, some patients may not be able or willing to comply with clinical trial protocols if q uarantines impede patient movement or interrupt s healthcare services .

While the trial continues to progress, many clinical trial sites in our ongoing Phase 1b/2a clinical trial have temporarily suspended dosing of previously-enrolled patients and/or enroll ment of new patients and some patients have discontinued from the trial .

Clinical trial sites are implementing procedures to allow them to safely re-engage during the second quarter of 2020;

however, w e are unable to predict with confidence when such sites will begin dosing and/or enrolling patients .

Further, some patients may not be able or willing to comply with clinical trial protocols if quarantines impede patient movement or interrupts healthcare services.

Earlier this year, many clinical trial sites in our Phase 1b/2a clinical trial temporarily suspended dosing of previously-enrolled patients and/or enrollment of new patients and some patients discontinued from the trial.

The majority of our clinical trial sites have implemented procedures to allow them to safely re-engage in enrollment and trial activities.

If patient enrollment or continued dosing of enrolled patients is delayed for an extended period of time, our Phase 1b/2a clinical trial could be further delayed or otherwise adversely affected.

In addition, we recently announced a Phase 2 clinical trial in 30 COVID-19 patients with severe respiratory complications and we are in the process of establishing clinical trial sites for this trial.

In addition, we recently began enrolling patients in our Phase 2 clinical trial in COVID-19 patients with severe respiratory complications and we are in the process of establishing additional clinical trial sites for this trial.

Potential trial sites may be overwhelmed by the COVID-19 pandemic and may be unable to participate in this clinical trial due to such constraints.

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We have also identified NRP2 as a receptor for ATYR1923 and have focused research efforts on NRP2 biology.

Our future success is highly dependent on the successful development of product candidates based these new areas of biology, including ATYR1923 and additional product candidates arising from the Resokine pathway or other pathways.

Extracellular tRNA synthetase-based biology and NRP2 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.

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sourcing clinical and, if approved, commercial supplies for the materials used to manufacture and process our product candidates;

developing a manufacturing process and distribution network that ensures consistent manufacture of our product candidates in compliance with current cGMPs and related requirements, with a cost of goods that allows for an attractive return on investment;

developing a manufacturing process and distribution network that ensures consistent manufacture of our pro duct candidates in compliance with current cGMPs and related requirements, with a cost of goods that allows for an attractive return on investment;

obtaining and maintaining third-party coverage and adequate reimbursement of our product candidates;

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Any inability to successfully develop commercially viable drugs would have an adverse impact on our business, prospects, financial condition and results of operations.

Data generated in our preclinical studies and patient sample data relating to the Resokine pathway may not be predictive or indicative of the immuno-modulatory activity or therapeutic effects, if any, of our product candidates in patients.

Our scientists discovered the Resokine pathway using in vivo screening systems designed to test potential immuno-modulatory activity in animal models of severe immune activity or inflammation, combined with data relating to the potential blockade of the Resokine pathway in a population of patients with myopathy that occurs in a particular rare disease, anti-synthetase syndrome, with Jo-1 antibodies.

Data generated in our preclinical studies and patient sample data relating to the immunomodulatory domain of HARS, including ATYR1923, may not be predictive or indicative of the immuno-modulatory activity or therapeutic effects, if any, of our product candidates in patients.

Our scientists discovered the activity of the immunomodulatory domain of HARS, including ATYR1923, using in vitro and in vivo screening systems designed to test potential immuno-modulatory activity in models of immune activity or inflammation.

Translational medicine, or the application of basic scientific findings to develop therapeutics that promote human health, is subject to a number of inherent risks.

In particular, scientific hypotheses formed from preclinical observations may prove to be incorrect, and the data generated in animal models or observed in limited patient populations may be of limited value, and may not be applicable in clinical trials conducted under the controlled conditions required by applicable regulatory requirements and our protocols.

For example, we have not extensively studied the activity of the Resokine pathway in patients with ILDs or COVID-19

patients with severe respiratory complications , which forms the basis for our ongoing clinical trial of ATYR1923 in those patients populations .

Our knowledge of the activity of this pathway in Jo-1 antibody patients may not be applicable to our target patient populations.

In addition, 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 immuno-modulatory activity of molecules containing the iMod domain 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 ATYR1923, we are still expanding our knowledge of the role of the NRP2 pathway, and in particular how the Resokine pathway modulates disease pathology.

For example, we have not extensively studied the activity of ATYR1923 in patients with ILDs or COVID-19 patients with severe respiratory complications, which forms the basis for our ongoing clinical trials of ATYR1923 in those patient populations.

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 immuno-modulatory activity of ATYR1923 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 ATYR1923, we are still expanding our knowledge of the role of the NRP2 pathway in regulating immune responses.

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.

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Undesirable side effects caused by our product candidates, or safety, tolerability or toxicity issues that may occur in our preclinical studies, clinical trials or in the future, could cause us or regulatory authorities to interrupt, restrict, delay, or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities.

In our Phase 1b/2 clinical trials for our first clinical trial candidate, ATYR1940, completed in 2016 and 2017, we observed low levels of antibodies to ATYR1940 in some subjects in response to the administration of ATYR1940.

Although these antibody observations were without associated clinical symptoms, the development of higher levels of such antibodies over a longer course of treatment may ultimately limit efficacy and trigger a negative autoimmune response, including the development of anti-synthetase syndrome.

Anti-synthetase syndrome can include one or more of the following clinical features:

ILD, inflammatory myopathy and

inflammatory polyarthritis.

Some patients in our Phase 1b/2 clinical trials of ATYR1940 experienced generalized infusion related reactions (IRRs) and discontinued dosing.

We estab lished procedural measures, including a decreased concentration and intravenous delivery rate of ATYR1940, in an effort to minimize the occurrence of generalized IRRs and the formation of anti-drug antibodies.

After implementation of these procedures, we o bserve d a decreased rate of IRRs in our clinical trials, but we cannot assure that these measures will be effective in minimizing the occurrence of generalized IRRs or the formation of anti-drug antibodies in our ongoing Phase 1b/2a clinical trial of ATYR1 923 in patients with pulmonary sarcoidosis, our Phase 2 clinical trial of ATYR 1923 in COVID-19 patients with severe respiratory complications or any future clinical trials, or result in the retention of patients in future clinical trials.

However, we did n ot observe IRRs in our interim safety data analysis of our Phase 1b/2a clinical trial of ATYR1923 in pulmonary sarcoidosis in December 2019.

In our Phase 1b/2 clinical trials for our first clinical trial candidate, ATYR1940 (slightly truncated recombinant HARS protein), completed in 2016 and 2017, we observed low levels of antibodies to ATYR1940 in some subjects in response to the administration of ATYR1940.

In addition, some patients in our Phase 1b/2 clinical trials of ATYR1940 experienced generalized infusion related reactions (IRRs) and discontinued dosing.

We established procedural measures, including a decreased concentration and intravenous delivery rate of ATYR1940, in an effort to minimize the occurrence of generalized IRRs and the formation of anti-drug antibodies.

After implementation of these procedures, we observed a decreased rate of IRRs in our clinical trials, but we cannot assure that these measures will be effective in minimizing the occurrence of generalized IRRs or the formation of anti-drug antibodies in our ongoing ATYR1923 clinical trials or any future clinical trials, or result in the retention of patients in these clinical trials.

However, we did not observe IRRs in our interim safety data analysis of our Phase 1b/2a clinical trial of ATYR1923 in pulmonary sarcoidosis in December 2019.

Generalized IRRs and other complications or side effects could harm further development and/or commercialization of our product candidates, including ATYR1923.

In addition, any adverse events observed in our ATYR1923 Phase 2 clinical trial in COVID-19 patients with severe respiratory complications may discourage patients from enrolling in our ATYR1923 Phase 1b/2a clini cal trial in pulmonary sarcoidosis.

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 respo nses 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 exposur e 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 anti-synthetas e syndrome 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 o f operations.

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.

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.

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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We may choose to focus our efforts and resources on a potential product candidate that ultimately proves to be unsuccessful.

If we are unable to identify suitable product candidates for preclinical and clinical development and regulatory approval, we will not be able to generate product revenues, which would have an adverse impact on our business, prospects, financial condition and results of operations.

If we are unable to identify suitable product candidates for preclinical and clinical development and regulatory approva l, we will not be able to generate product revenues, which would have an adverse impact on our business, prospects, financial condition and results of operations.

We may face manufacturing stoppages and other challenges associated with the clinical or commercial manufacture of our tRNA synthetase-based therapeutics.

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Poor control of production processes can lead to the introduction of contaminants or to inadvertent changes in the properties or stability of our product candidates that may not be detectable in final product testing.

We or our CDMOs must supply all necessary documentation in support of a biological license application (BLA) on a timely basis and must adhere to the FDA’s Good Laboratory

Practices (GLP) and cGMP regulations enforced by the FDA through its facilities inspection program.

The fac ilities and quality systems of our CDMOs and other CROs must pass a pre-approval inspection for compliance with applicable regulations as a condition of regulatory approval of our product candidates.

If these facilities do not pass a pre-approval plant ins pection, FDA approval of the products will not be granted.

We or our CDMOs must supply all necessary documentation in support of a biological license application (BLA) on a timely basis and must adhere to the FDA’s Good Laboratory Practices (GLP) and cGMP regulations enforced by the FDA through its facilities inspection program.

The facilities and quality systems of our CDMOs and other CROs must pass a pre-approval inspection for compliance with applicable regulations as a condition of regulatory approval of our product candidates.

If these facilities do not pass a pre-approval plant inspection, FDA approval of the products will not be granted.

In response to the global COVID-19 pandemic, on March 10, 2020 the FDA announced its intention to postpone most foreign inspections of manufacturing facilities and products through April 2020, and subsequently, on March 18, 2020, the FDA announced its intention to temporarily postpone routine surveillance inspections of domestic manufacturing facilities.

If global health concerns continue to prevent the FDA or other regulatory authorities from condu cting their regular inspections, it could impact the ability of our CDMOs to provide us with product for clinical trials .

On July 10, 2020, the FDA announced its intention to restart routine surveillance inspections of domestic manufacturing facilities.

If global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, it could impact the ability of our CDMOs to provide us with product for clinical trials.

The regulatory authorities also may, at any time following approval of a product for sale, audit the facilities in which the product is manufactured.

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The manufacturing processes for one of our product candidates may not be readily adaptable to other product candidates that we develop, and we may need to engage multiple third-party manufacturers to produce our product candidates.

Any adverse developments affecting manufacturing operations for our product candidates may result in shipment delays, inventory shortages, lot failures, withdrawals or recalls or other interruptions in the supply of our drug substance and drug product which could delay the development of our product candidates.

We may also have to write off inventory, incur other charges and expenses for supply of drug product that fails to meet specifications or expires, undertake costly remediation efforts, or seek more costly manufacturing alternatives.

Any manufacturing stoppage or delay, or any inability to consistently manufacture adequate supplies of our product candidates for our clinical trials or on a commercial scale will harm our business, prospects, financial condition and results of operations.

Any adverse developments affecting

manufacturing operations for our product candidates may result in shipment delays, inventory shortages, lot failures, withdrawals or recalls or other interruptions in the supply of o ur drug substance and drug product which could delay the development of our product candidates.

We may also have to write off inventory, incur other charges and expenses for supply of drug product that fails to meet specifications or expires, undertake cos tly remediation efforts, or seek more costly manufacturing alternatives.

Any manufacturing stoppage or delay, or any inability to consistently manufacture adequate supplies of our product candidates for our clinical trials or on a commercial scale will har m our business, prospects, financial condition and results of operations.

Even if we complete the necessary preclinical studies and clinical trials, we cannot predict when or if we will obtain regulatory approval to commercialize a product candidate, and the scope of any approval may be narrower than we expect.

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In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory agency policy during the period of product development, clinical trials and the review process.

Regulatory agencies also may approve a product candidate for fewer or more limited indications than requested, may impose restrictions on

dosing or may grant approval subject to the performance of post-marketing studies.

Regulatory agencies also may approve a product candidate for fewer or more limited indications than requested, may impose restrictions on dosing or may grant approval subject to the performance of post-marketing studies.

In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of our product candidates.

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Average review times at the agency have fluctuated in recent years as a result.

In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and

unpredictable.

Disruptions at the FDA and other agencies may also slow the time necessary for new product candidates to be reviewed and/or approved by necessary government agencies, which would adversely affect our business.

For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S.

government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.

g overnment has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities.

Even if we obtain regulatory approval for a product candidate, our products will remain subject to regulatory scrutiny.

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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 candi date.

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

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Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenue from our products.

If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected.

If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company an d our operating results will be adversely affected.

Risks related to our reliance on third parties

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We are also eligible to receive up to an additional $167.0 million in the aggregate upon achievement of certain development, regulatory and sales milestones, as well as tiered royalties ranging from the mid-single digits to mid-teens on net sales in Japan.

We previously entered into the CSL Agreement, relating to the

development of product candidates derived from up to four tRNA synthetases where CSL funds research and development activities and may be obligated to pay a total of $4.25 million per synthetase program ($17 .0 million if all four synthetase programs advance) in option fees based on achievement of research milestones and CSL’s determination to continue development.

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

We previously entered into the CSL Agreement, relating to the development of product candidates derived from up to four tRNA synthetases where CSL funds research and development activities and may be obligated to pay a total of $4.25 million per synthetase program ($17.0 million if all four synthetase programs advance) in option fees based on achievement of research milestones and CSL’s determination to continue development.

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

Some collaborators may not succeed in their product development efforts.

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If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our research and development activities, including clinical trials, in accordance with regulatory requirements or our stated study plans and protocols, we will not be able to complete, or may be delayed in completing, the preclinical studies and clinical trials required to support future BLA submissions and approval of our product candidates.

We rely and intend to rely on third parties to produce preclinical, clinical and commercial supplies of our product candidates.

We rely and intend to rely on third parties to produce preclinical, clinica l and commercial supplies of our product candidates.

Other than some internal capacity to support preclinical activities, we do not have, nor do we plan to acquire, the infrastructure or capability internally to manufacture our preclinical and clinical quantities of our product candidates, and we lack the internal resources and capability to manufacture any of our product candidates on a clinical or commercial scale.

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Any of these events could lead to clinical trial delays or failure to obtain regulatory approval, or impact our ability to successfully commercialize future products.

Some of t hese events could be the basis for FDA action, including injunction, recall, seizure or total or partial suspension of production.

Some of these events could be the basis for FDA action, including injunction, recall, seizure or total or partial suspension of production.

Additionally, each CDMO may require licenses to manufacture our product candidates or components thereof if the applicable manufacturing processes are not owned by the CDMO or in the public domain, and we may be unable to transfer or sublicense the intellectual property rights we may have with respect to such activities.

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They may also have relationships with other commercial entities , including our competitors, for whom they may also be conducting clinical trials or other drug development activities that could harm our competitive position.

If our investigators or CROs do not successfully carry out their contractual duties or obligations, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for any other reasons, our clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize our product candidates.

As a result, our financial results would be harmed, our costs could increase, our ability to generate revenues could be delayed and the commercial prospects for our product candidates will be adversely affected.

Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade se crets will be misappropriated or disclosed.

If our investigators or CROs do not successfully carry out their contractual duties or obligati ons, fail to meet expected deadlines, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements, or for any other reasons, our clinical trials may be exte nded, delayed or terminated, and we may not be able to obtain regulatory approval for, or successfully commercialize our product candidates.

As a result, our financial results would be harmed, our costs could increase, our ability to generate revenues coul d be delayed and the commercial prospects for our product candidates will be adversely affected.

We rely on third parties to manufacture our product candidates, and we collaborate with both industry and various academic institutions in the development of our discovery engine for therapeutic applications based on tRNA synthetase biology.

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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.

Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property, provide exclusivity for our product candidates or prevent others from designing around our claims.

If the breadth or strength of protection provided by the patents and patent applications we hold, license or pursue with respect to our product candidates is threatened, it could threaten our ability to commercialize our product candidates.

Further, if we encounter delays in our clinical trials, the period of time during which we could market any of our product candidates under patent protection, if approved, would be reduced.

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

Changes to the patent laws in the United States and other jurisdictions could also

diminish the value of our patents and patent applications or narrow the scope of our patent protection.

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.

Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual pro perty, provide exclusivity for our product candidates or prevent others from designing around our claims.

If the breadth or strength of protection provided by the patents and patent applications we hold, license or pursue with respect to our product candid ates is threatened, it could threaten our ability to commercialize our product candidates.

Further, if we encounter delays in our clinical trials, the period of time during which we could market any of our product candidates under patent protection, if app roved, would be reduced.

Changes to the patent laws in the United States and other jurisdictions could also diminish the value of our patents and patent applications or narrow the scope of our patent protection.

Any of these outcomes could impair our ability to prevent competit ion from third parties, which may have an adverse impact on our business.

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Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States.

As a result, we may encounter significant problems in preventing third parties from practicing our inventions in countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions.

Claims that our product candidates or the manufa cture, sale or use of our future products infringe the patent or other intellectual property rights of third parties could result in costly litigation or could require substantial time and money to resolve, even if litigation is avoided.

As a result, we may encounter significant problems in preventing third parties from practicing our

inventions in countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions.

Claims that our product candidates or the manufacture, sale or use of our future products infringe the patent or other intellectual property rights of third parties could result in costly litigation or could require substantial time and money to resolve, even if litigation is avoided.

Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties.

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These institutions may provide us with an option to negotiate a license to the institution’s rights in technology resulting from the collaboration.

Regardless of any such right of first negotiation for intellectual property, we may be unable to negotiate a license within the specified time frame or under terms that are acceptable to us.

unable to do so, the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursue our program.

Regardless of any such right of first negotiation for intellectual

property, we may be unable to negotiate a license within the specified time frame or under terms that are acceptable to us.

If we are unable to do so, the institution may offer the intellectual property rights to other parties, potentially blocking our ability to pursue our program.

In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us.

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We employ law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules.

However, there are situations in which non-

compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the rel evant jurisdiction.

However, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights

in the relevant jurisdiction.

In such an event, our competitors might be able to enter the market and this circumstance would have a material adverse effect on our business.

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

Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but

enforcement is not as strong as that in the United States.

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

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

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

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

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

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Our business could continue to be adversely affected by the effects of the COVID-19 pandemic.

In December 2019, COVID-19, a novel strain of coronavirus, was first reported in Wuhan, China and has since become a global pandemic.

The global pandemic resulting from the disease known as COVID-19 caused by a novel strain of coronavirus, SARS-CoV-2, has caused national and global economic and financial market disruptions.

The President of the United States declared the COVID-19 pandemic a national emergency and many states and municipalities in the United States have announced aggressive actions to reduce the spread of the disease, including limiting non-essential gatherings of people, ceasing all non-essential travel, ordering certain businesses and government agencies to cease non-essential operations at physical locations and issuing “shelter-in-place” orders which direct individuals to shelter at their places of residence (subject to limited exceptions).

For example, on March 19, 2020, the Executive Department of the State of California issued Executive Order N-33-20, ordering all individuals in the State of California to stay at their place of residence except as needed to maintain continuity of operations of the federal critical infrastructure sectors.

As a result of the California state order, most of our employees are currently telecommuting, which has impacted certain of our operations and may continue to do so over the long term.

As a result, most of our employees are currently telecommuting, which has impacted certain of our operations and may continue to do so over the long term.

We may experience further limitations on employee resources in the future, including because of sickness of employees or their families.

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

delays or difficulties in enrolling patients in our clinical trials;

de lays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;

delays or difficulties in enrolling and retaining patients in our clinical trials;

delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;

delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials, including interruption in global shipping that may affect the transport of clinical trial materials;

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interruption or delays in the operations of the FDA or other regulatory authorities, which may impact review and approval timelines;

risk that participants enrolled in our clinical trials will acquire COVID-19 while the clinical trial is ongoing, which could impact the results of the clinical trial, including by increasing the number of observed adverse events;

risk that participants enrolled in our Phase 1b/2a clinical trial in patients with pulmonary sarcoidosis will acquire COVID-19 while the clinical trial is ongoing, which could impact the results of the clinical trial, including by increasing the number of observed adverse events;

refusal of the FDA to accept data from clinical trials in affected geographies;

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Our Phase 1b/2a clinical trial in patients with pulmonary sarcoidosis has been and will likely continue to be, negatively affected by the COVID-19 pandemic .

In particular, w hile the trial continues to progress, many clinical trial sites in this clinical trial have temporarily suspended dosing of previously-enrolled patients and/or enrollment of new patients and some patients have discontinued from the trial.

Our clinical trial sites are in the process of implementing procedures to allow them to begin dosing and/or enrolling patients in our clinical trial during the second quarter of 2020.

As a result, we anticipate that the availability of top-line results from this clinical trial will be delayed.

Earlier this year, many clinical trial sites in this clinical trial temporarily suspended dosing of previously-enrolled patients and/or enrollment of new patients and some patients discontinued from the trial.

While the majority of our clinical trial sites have implemented procedures to allow them to safely re-engage in enrollment and trial activities, the availability of top-line results from this clinical trial is delayed.

These events could significantly delay our Phase 1b/2a clinical trial, increase the cost of completing our Phase 1b/2a clinical trial and lead to questions about the integrity, reliability or robustness of the data from our Phase 1b/2a clinical trial.

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Further, we currently rely, and expect to continue to rely, on third parties to conduct some or all aspects of product manufacturing, protocol development, and research and preclinical and clinical testing with respect to our product candidates.

many materials on which we rely may be obta ined by more than one supplier , port closures , travel bans and other restrictions resulting from the COVID-19 outbreak may disrupt our supply chain or limit our ability to obtain sufficient mater ials to conduct our operations .

While many materials on which we rely may be obtained by more than one supplier, port closures, travel bans and other restrictions resulting from the COVID-19 outbreak may disrupt our supply chain or limit our ability to obtain sufficient materials to conduct our operations.

As a result of these events and uncertainties, we may need to obtain additional funding through a combination of equity offerings, grant funding, collaborations, strategic partnerships and/or licensing arrangements, and potentially through debt financings, if available on acceptable terms or at all.

We may be unable to raise additional funds on acceptable terms or at all.

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

As a result of the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have experienced extreme volatility

and disruptions, includ ing severely diminished liquidity and credit availability, declines in consumer confidence, declines i n economic growth, increases in unemployment rates and uncertainty about economic stability.

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

The impact of COVID-19 on capital markets may affect the availability, amount and type of financing available to us in the future.

If we are unable to raise additional funds, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

If we are unable to raise additional funds, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would oth erwise prefer to develop and market such product candidates ourselves.

COVID-19 and actions taken to reduce its spread continue to rapidly evolve.

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

For example, as a result of the COVID-19 pandemic, the President of the United States signed an executive order to pause the issuance of green cards for 60 days from April 23, 2020, which may be extended.

If this restriction and any future similar restrictions continue for an extended period of time, the available pool of skilled employees will be further reduced.

For example, as a result of the COVID-19 pandemic, on April 23, 2020, the President of the United States signed an executive order to pause the issuance of green cards until June 22, 2020.

If future similar restrictions continue for an extended period of time, the available pool of skilled employees will be further reduced.

Further, failure to succeed in preclinical studies or clinical trials may make it more challenging to recruit and retain qualified personnel.

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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 are subject t o a variety of risks associated with international operations that could materially adversely affect our business.

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

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These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.

Such misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and cause serious harm to our reputation.

Such misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in significant regulatory sanctions and cause serious harm to our reputation.

We have adopted a code of business conduct and ethics applicable to all of our employees, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations.

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We carry product liability insurance for our clinical trials covering $10.0 million per occurrence and up to $10.0 million in the aggregate, subject to certain deductibles and exclusions.

reasonable cost or in sufficient amounts to protect us against losses due to liability.

If and when we obtain marketing approval for product candidates, we intend to expand our insu rance coverage to include the sale of commercial products;

Although we believe the amount of our insurance coverage is typical for companies similar to us in our industry, we may not have adequate insurance coverage or be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability.

If and when we obtain marketing approval for

product candidates, we intend to expand our insurance coverage to include the sale of commercial products;

however, we may be unable to obtain product liability insurance on commercially reasonable terms or in adequate amounts.

On occasion, large judgments have been awarded in class action lawsuits base d on drugs or medical treatments that had unanticipated adverse effects.

A successful product liability claim or series of claims brought against us could cause our stock price to decline and adversely affect our reputation and, if judgments exceed our ins urance coverage, could adversely affect our results of operations and business.

On occasion, large judgments have been awarded in class action lawsuits based on drugs or medical treatments that had unanticipated adverse effects.

A successful product liability claim or series of claims brought against us could cause our stock price to decline and adversely affect our reputation and, if judgments exceed our insurance coverage, could adversely affect our results of operations and business.

Patients with the diseases targeted by our product candidates are often already in severe and advanced stages of disease and may have both known and unknown significant pre-existing and potentially life-threatening health risks.

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There can be no assurance that we will be successful in preventing cyber-attacks or mitigating their effects.

Despite the implementation of security measures, our internal computer systems and those of our contractors and consultants are vulnerable to damage from such cy ber-attacks, including computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.

Despite the implementation of security measures, our internal computer systems and those of our contractors and consultants are vulnerable to damage from such cyber-attacks, including computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.

Such an event could cause interruption of our operations.

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

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.

Additionally, theft of our intellectual property or proprietary business information could require substantial expenditures to remedy.

To the extent that any disruption or security breach were to result in a loss of or damage to our data, theft of our intellectual property, or inappropriate disclosure of confidential or proprietary information, we could suffer reputational harm or face litigation or adverse regulatory action and the development of our product candidates could be delayed.

To the extent that any disruption or security breach were to result in a loss of or damage to our da ta, theft of our intellectual property, or inappropriate disclosure of confidential or proprietary information, we could suffer reputational harm or face litigation or adverse regulatory action and the development of our product candidates could be delayed .

We may be subject to certain regulations, including federal and state healthcare fraud and abuse laws and health information privacy and security laws.

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

example, in March 2017, the U.K.

government provided off icial legal notification to the EU that the U.K.

will exit the EU (commonly referred to as Brexit), which could lead to a period of considerable uncertainty, particularly in relation to global financial markets which in turn could adversely affect our abil ity to raise additional capital.

In addition, due to the COVID-19 pandemic, the global credit and financial markets have recently experienced extreme volatility and disruptions, includ ing diminished liquidity and credit availability, declines in consumer c onfidence, declines i n economic growth, increases in unemployment 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 in ability to raise additional capital when needed on acceptable terms, if at all.

A weak or declining economy could also strain our CDMOs, possibly resulting in supply disruption.

Any of the foregoing could harm our business and we cannot anticipate all of t he ways in which the current economic climate and financial market conditions could adversely impact our business.

For example, in March 2017, the U.K.

government provided official legal notification to the EU that the U.K.

In addition, due to the COVID-19 pandemic, the global credit and financial markets have recently experienced extreme volatility and disruptions, including diminished liquidity and credit

availability, declines in consumer confidence, declines i n economic growth, increases in unemployment rates and uncertainty about economic stabil ity .

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.

A weak or declining economy c ould also strain our CDMOs, possibly resulting in supply disruption.

Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our busi ness.

We or the third parties upon whom we depend may be adversely affected by earthquakes, droughts, floods, fires or other natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

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In addition, any significant disruption in our relationships with our CDMOs could harm our business.

There are a relatively small number of pote ntial manufacturers for our product candidates, and such manufacturers may not be able to supply our drug products at the times we need them or on commercially reasonable terms.

Any disruption to our relationship with our current CDMOs and any manufacturer s that we contract with in the future will result in delays in our ability to complete the clinical development of, or to commercialize, our product candidates, and may require us to incur additional costs.

There are a relatively small number of potential manufacturers for our product candidates, and such manufacturers may not be able to supply our drug products at the times we need them or on commercially reasonable terms.

Any disruption to our relationship with our current CDMOs

and any manufacturers that we contract with in the future will result in delays in our ability to complete the clinical development of, or to commercialize, our product candidates, and may require us to incur additional costs.

We face intense competition and rapid technological change and the possibility that our competitors may develop therapies that are more advanced or effective than ours, which may adversely affect our financial condition and our ability to successfully commercialize our product candidates.

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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.

In many countries, the prices of medical products are

subject to varying price control mechanisms as part of national health systems.

In g eneral, the prices of medicines under such systems are substantially lower than in the United States.

In many countries, the prices of medical products are subject to varying price control mechanisms as part of national health systems.

In general, the prices of medicines under such systems are substantially lower than in the United States.

Other countries allow companies to fix their own prices for medicines, but monitor and control company profits.

Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates.

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.

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 currentl y restrict imports of medicines from countries where they may be sold at lower prices than in the United States.

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.

Net prices for medicines may be reduced by mandatory discounts or rebates req uired 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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Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products.

For example, on July 24, 2020, President Trump announced four executive orders related to prescription drug pricing that attempt to implement several of the Trump administration’s proposals, including a policy that would tie Medicare Part B drug prices to international drug prices;

one that directs HHS to finalize the Canadian drug importation proposed rule previously issued by HHS and makes other changes allowing for personal importation of drugs from Canada;

one that directs HHS to finalize the rulemaking process on modifying the anti-kickback law safe harbors for plans, pharmacies, and pharmaceutical benefit managers;

and one that reduces costs of insulin and epipens to patients of federally qualified health centers.

We expect to experience pricing pressures in connection with the sale of any of our product candidates, due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes, including the potential repeal and replacement of the ACA.

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Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives.

Moreover, these rules and regulations will increase our legal and financial compliance

costs and will make some activities more time-consuming and costly.

For example, we expect these rules and regulations to make it more difficult and more expensive for us to maintain director and officer liability insurance and we have been required to incur substantial cost s to maintain our current levels of such coverage.

Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.

For example, we expect these rules and regulations to make it

more difficult and more expensi ve for us to maintain director and officer liability insurance and we have been required to incur substantial costs to maintain our current levels of such coverage.

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 May 8, 2020, 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 23.6% of our voting stock.

As of August 7, 2020, 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 38.4% 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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Wainwright is entitled to a commission at a fixed rate equal to 3% of the gross proceeds.

Under the ATM Offering Program, during 2019, we had sold an aggregate of 611,687 shares of common stock at an average price of $5.43 per share for net proceeds of approximately $3.0 million.

We did not utilize the ATM Offering Program during the three months ended March 31, 2020.

Under the ATM Offering Program, during 2019, we had sold an aggregate of 611,687 shares of common stock at an average price of $5.43 per share for gross proceeds of approximately $3.3 million.

During the six months ended June 30, 2020, we sold an aggregate of 23,148 shares of common stock at an average price of $4.49 per share for gross proceeds of $0.1 million under the ATM Offering Program.

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

Any sales of securities by these stockholders could ha ve a material adverse effect on the trading price of our common stock, even if there is no relationship between such sales and the performance of our business.

Any sales of securities by these stockholders could have a mate rial adverse effect on the trading price of our common stock, even if there is no relationship between such sales and the performance of our business.

We have also registered or plan to register all common stock that we may issue under our employee benefits plans as well as shares of common stock underlying options to purchase shares of our common stock that were granted as inducement grants.

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Also, it may be difficult for us to raise additional capital if we are not listed on a major exchange.

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

We have broad discretion in the use of our cash, cash equivalents and investments and are exposed to risks related to the marketable securiti es we may purchase.

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

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Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations .

We have incurred substantial losses during our history, we do not expect to become profitable in the near future and we may never achieve profitability.

We hav e incurred substantial losses during our history, we do not expect to become profitable in the near future and we may never achieve profitability.

Net operating loss carryforwards (NOLs) that expire unused will be unavailable to offset future income tax liabilities.

Under the Tax Cuts and Jobs Act of 2017, as modified by Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, federal net operating losses incurred in tax years beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such federal NOLs in tax years beginning after December 31, 2020, is limited to 80% of taxable income.

Under the Tax Cuts and Jobs Act of 2017, as modified by Coronavirus Aid, Relief, and Economic Security Act, (CARES Act) federal net operating losses incurred in tax years beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such federal NOLs in tax years beginning after December 31, 2020, is limited to 80% of taxable income.

It is uncertain if and to what extent various states will conform to the Tax Cuts and Jobs Act of 2017 or the CARES Act.

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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, our existing NOLs could expire or otherwise be unavailable to reduce future income tax liabilities, including for state tax purposes.

For example, California recently imposed limits on the usability of California state net operating losses to offset taxable income in the tax years beginning after 2019 and before 2023.

For these reasons, we may not be able to utilize a material portion of the 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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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