CDT Equity Inc. 10-K

Item 1. Business Overview On September 22, 2023, a merger transaction between Conduit Pharmaceuticals Limited (“Old Conduit”), Murphy Canyon Acquisition Corp (“MURF”) and Conduit Merger Sub, Inc., a Cayman Islands exempted company and a wholly owned subsidiary of MURF (“Merger Sub”), was completed pursuant to the Agreement and Plan of Merger, dated November 8, 2022, as amended, (the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, at the closing, (i) Merger Sub merged with and into Old Conduit, with Old Conduit surviving the merger as a wholly-owned subsidiary of MURF, and (ii) MURF changed its name from Murphy Canyon Acquisition Corp. to Conduit Pharmaceuticals Inc. (hereafter referred to, collectively with is subsidiaries as “Conduit”, the “Company”, “we”, “us” or “our”, unless the context otherwise requires). The common stock of the Company commenced trading on The Nasdaq Global Market under the symbol “CDT” on September 25, 2023, and the Company’s warrants commenced trading on The Nasdaq Capital Market under the symbol “CDTTW” on September 25, 2023 . Conduit has developed a unique business model that allows it to act as a conduit to bring clinical assets from pharmaceutical companies and develop new treatments for patients. Our novel approach addresses unmet medical needs and lengthens the intellectual property for our existing assets through cutting-edge solid-form technology and then commercializing these products with life science companies. We are led by highly experienced pharmaceutical executives: Dr. Freda Lewis-Hall, former Chief Medical Officer of Pfizer Inc., the Chair of our Board of Directors, and Dr. David Tapolczay, former Chief Executive Officer of the United Kingdom-based medical research charity LifeArc, our Chief Executive Officer. Our management team includes active senior clinicians who have an extensive understanding of the pharmaceuticals market, which supports our strategy of developing clinical assets in a cost-efficient manner while focusing on therapeutic efficacy and patient safety. We believe that we can leverage the capabilities of our Cambridge laboratory facility and highly experienced team of solid-form experts to extend or develop proprietary solid-form intellectual property for our existing and future clinical assets. Our own intellectual property portfolio comprises a 20-year patent pending solid-form compound, the AZD1656 Cocrystal (a HK-4 Glucokinase Activator), targeting a wide range of autoimmune diseases. Our pipeline research includes a number of compounds that serve as promising alternatives to existing clinical assets currently marketed and sold by large pharmaceutical companies, which we have identified as having an opportunity to develop further intellectual property positions through solid-form technology. In connection with the funding and development of clinical assets, we evaluate and select the specific molecules to be developed and collaborate with external contract research organizations (“CROs”) and Key Opinion Leaders (“KOLs”) to run clinical trials that are managed, funded, and overseen by us. We intend to leverage our comprehensive clinical and scientific expertise in order to facilitate development of clinical assets through Phase II trials in an efficient manner by using CROs and third-party service providers. We will also collaborate closely with disease specific KOLs to collectively assess and determine the most appropriate indications for all our current and forthcoming assets. We believe that successful Phase II trials of the clinical assets in our pipeline will increase the value of our assets. There is no assurance that any clinical trials on the assets owned or licensed by us will be successful, however, following a successful Phase II clinical trial, we would look to licensing opportunities with large biotech or pharmaceutical companies, typically for up-front milestone payments and royalty income streams for the life of the asset patent. We anticipate using any future royalty income stream to develop our asset portfolio in combination with other potential sources of financing, including debt or equity financing. Outside of our proprietary owned patented clinical assets, we have an exclusive relationship and partnership with St George Street Capital (“St George Street”), a biomedical charity based in the United Kingdom. We have the option to fund 100% of the development of clinical assets that were initially licensed to St George Street by AstraZeneca PLC (AZN.L) (“AstraZeneca”). AstraZeneca has conducted initial pre-clinical and, in some instances, clinical trials on these assets, but has decided to license them for further development. At present, the Company has not definitely determined whether to fund any of projects through St George Street, although its ability to choose to remains at the present time. Subject to the terms of the Global Funding Agreement and the project funding agreements (described in further detail below), either we or St George Street may seek funding for projects from third parties. In addition to our patent pending solid-form compound targeting a wide range of autoimmune diseases, two assets which were licensed from AstraZeneca to St George Street that may be developed by us include AZD5904 (a Myeloperoxidase Inhibitor) targeting idiopathic male infertility and AZD1656 (a Glucokinase Activator) targeting autoimmune diseases or immunodeficient conditions including uveitis, premature labor, renal transplant rejection, and Hashimoto’s thyroiditis. As the clinical assets have undergone initial pre-clinical and clinical testing conducted by AstraZeneca, we are able to use the safety data generated in these clinical trials to assess which clinical assets to further develop and for which indications. Through this relationship, there are considerable active pharmaceutical ingredients (“APIs”) that were manufactured by AstraZeneca in conducting its clinical trials available. As a result, Conduit does not have to develop the API, which is often a time consuming and expensive process, and the API already produced was subject to rigorous quality control measures. Furthermore, Conduit is well positioned, and intends, to pursue additional relationships and/or partnerships with third parties for the licensing of further assets which are currently deprioritized. We plan to focus our efforts on developing clinical assets to address diseases that impact a large population where there is no present treatment or the present treatment, carries significant unwanted side effects. 1 Our Initial Pipeline: HK-4 Glucokinase Activator Cocrystal, AZD1656 and AZD5904 We wholly own the intellectual property and the rights to further develop the solid-form patent pending Cocrystals of AZD1656 (AZD1656 Cocrystal WO2023084313 - Patent Expires 02/09/2042) which we intend to target a wide range of autoimmune diseases. Through our agreements, we have the exclusive rights to fund the development of clinical assets, AZD1656 and AZD5904, which are licensed to St George Street by AstraZeneca, in five indications. AZD1656 has undergone testing in a total of 20 Phase I clinical trials and five Phase II clinical trials conducted by AstraZeneca since 2008 and 19 of which were conducted in the U.S. Additional information about those clinical trials is available at the U.S. National Library of Medicine’s website at www.clinicaltrials.gov (however, the information contained on or otherwise accessible through such website is not part of this Annual Report). AZD5904 has undergone testing in five Phase I clinical trials conducted by AstraZeneca, one of which was conducted in the U.S. While a significant amount of clinical trial data has already been generated for both AZD1656 and AZD5904, some of this data was generated outside of the U.S. and accordingly may not be accepted by the FDA. In the event that such data is not accepted by the FDA, additional clinical trials may be required, which would result in additional costs and time to develop these clinical assets. Asset Development Our initial development plan is to conduct a Phase II clinical trial on the selected AZD1656 Cocrystal (which we wholly own the intellectual property rights to), that we believe has the potential to treat a wide range of autoimmune diseases. Should we choose to develop AZD1656 or AZD5904, that development would be subject to the terms of the Global Funding Agreement, described in more detail below. We anticipate developing our Initial Pipeline (which has already undergone pre-clinical and clinical trials) through the Phase II stage and then monetizing such clinical assets through a license, royalty, or other transaction at this stage. At this time, we do not expect that we will commercialize any clinical assets or seek marketing approval from the FDA (or similar organizations) as we intend to enter into agreements with third parties following Phase II clinical trials for each such clinical asset that would provide that such third party would pursue the further development, commercialization, and marketing of such assets. To enable us to monetize our clinical assets, we, in partnership with CROs and KOLs, intend to conduct additional clinical trials on our clinical assets in order to generate clinical data to support the further development of our clinical assets beyond the Phase II stage. In the event successful clinical trial data is generated for a clinical asset with a particular indication, at that point, we will seek to enter into a license, royalty, or other transaction with a third party whereby the third party would continue to pursue the development of the clinical asset in Phase III clinical trials. There is no assurance that any clinical trials on the assets owned or licensed by us will be successful. We intend to use the income received from licensing clinical assets in our pipeline to fund the development of additional clinical assets, which will allow us to use the existing income stream from clinical assets that have been licensed to fund our on-going operations, including the development and commercialization of additional clinical assets, without having to rely solely on debt and/or equity financing. Our Development Strategy Our strategy is to generate value through the development of new medicines, or clinical assets, for patients where our research indicates that there are not effective pharmaceutical treatments available or such existing pharmaceutical treatments are not adequate due to, among other things, cost of such pharmaceuticals and side effects. We are working to develop new medicines in diseases where competitive treatments carry a high incidence of unacceptable side effects resulting in tolerability and compliance issues. We aim to extend and develop solid-form intellectual property on assets which are licensed from pharmaceutical companies or generated within our facility in Cambridge, UK. We believe that our Cambridge facility positions us at the nexus of scientific advancement, providing an environment to drive cutting-edge research and development initiatives. There is evidence that promising solid-form candidates can supersede original pharmaceutical products. We are currently in the process of developing new solid-form intellectual property on clinical assets which we believe will serve as promising alternatives for existing products on the market. We believe that our expertise and utilization of solid-form technology can potentially enhance the efficacy, bioavailability, solubility and delivery of existing products on the market. Once a candidate has been identified and patented, we will fund and conduct clinical trials through CROs. As previously indicated, our strategy also involves establishing strategic collaborations with globally recognized KOLs. We will collaborate closely with disease specific KOLs to collectively assess and determine the most appropriate indications for all our current and forthcoming assets. This approach ensures that the selection of indications aligns with the KOLs’ insights, in addition to our internal expertise, optimizing the development and success of Conduit’s diverse portfolio. Our unique relationships allow us to bypass certain traditional hurdles for the development of clinical assets. Through relationships with St George Street, and we anticipate, subsequently with AstraZeneca, our Initial Pipeline has already undergone initial pre-clinical, and, in some instances, clinical testing conducted by AstraZeneca, this enables us to use the safety data generated in the prior trials in order to assess which assets to continue to develop. We regularly assess our asset portfolio to identify potential risks and take steps to mitigate those risks, such as the repurposing of assets, which reduces development costs and timelines, as the clinical asset has already undergone safety and toxicity testing in humans, as well as extending the remaining patent life by up to 20 years on all assets which are licensed. The prior preclinical and clinical studies conducted by AstraZeneca allow us to reduce the costs, expenses, and time in the development of these assets by allowing us to continue the Phase Ib or Phase II stage, rather than the preclinical or Phase I stage, even if we are investigating the assets for a new indication. For example, if a clinical asset was subject to a Phase I trial, such clinical asset may be advanced to a Phase II trial even if the clinical asset is being investigated for a different indication. In addition, we have access to API manufactured by AstraZeneca and as a result, should we use their formulation, we do not have to develop a route of manufacture for the API, which is time consuming and expensive. Strategic Partnerships Global Funding Agreement – St George Street We and St George Street entered into an Exclusive Funding Agreement on March 26, 2021 (the “Global Funding Agreement”), pursuant to which St George Street granted us the exclusive first right to provide to St George Street, or procure the provision of, all funding for the performance of a drug discovery and/or development project in consideration for a share of the net revenue in respect of such project. We and St George Street currently have entered into five project funding agreements, which are subject to the terms of the Global Funding Agreement, to develop certain clinical assets that have been licensed to St George Street by AstraZeneca. The project funding agreements relate to: ● AZD1656 for use in renal transplant, ● AZD1656 for use in pre-term labor, ● AZD1656 for use in Hashimoto’s thyroiditis, ● AZD1656 for use in uveitis, and ● AZD5904 for use in idiopathic male infertility. At present, the Company has not determined whether to fund any of these projects, although its ability to choose to remains at the present time. Subject to the terms of the Global Funding Agreement and the project funding agreements, either we or St George Street may seek funding for projects from third parties. There may be additional opportunities for us to partner with St George Street to fund the development of additional clinical assets in the future, licensed from Astra Zeneca. Should we choose to fund these projects through St. George Street (“SGSC”), we are entitled to receive 100% of the Net Receipts (as defined in the relevant project funding agreement) under each of the project funding agreements. Pursuant to its terms, the Global Funding Agreement remains effective in respect of each project until the expiration of the right of a party to receive a share of the Net Revenue (as defined in the Global Funding Agreement) pursuant to the Global Funding Agreement. Under certain circumstances, St George Street may terminate a project (i) in the event of a material or persistent breach of the Global Funding Agreement by us, subject to a cure period if the breach is capable of remedy, or (ii) in the event St George Street decides to cease development of a project. If an event of force majeure occurs and continues for a designated period of time, the innocent party may terminate the Global Funding Agreement after a notice period. 2 Either party may terminate a project if a voluntary arrangement is proposed or approved or an administration order is made, or a receiver or administrative receiver is appointed of any of the other party’s assets or undertakings or a winding-up resolution or petition is passed (otherwise than for the purpose of solvent reconstruction or amalgamation, in particular with respect to any reorganization of the structure of that party) or if any circumstances arise which entitle a court or a creditor to appoint a receiver, administrative receiver or administrator or make a winding-up order or similar or equivalent action is taken against or by that other party by reason of its insolvency or in consequence of debt. Generally, each project funding agreement may be terminated by us if at any time St George Street ceases the conduct of development or commercialization of the relevant products in accordance with the relevant development plan for a designated period of time, provided that the termination is only effective with respect to the specified project and the Global Funding Agreement continues in effect for all other projects. They may also be terminated by either party upon written notice to other party if the other party materially breaches the project funding agreement and does not fully cure the breach to the non-breaching party’s satisfaction within 90 days. The Global Funding Agreement also contains customary representations and warranties. Each party also agreed to keep secret and confidential certain confidential information of the other party. The foregoing summary does not purport to be a complete description of all of the provisions of the Global Funding Agreement and related project funding agreements and is qualified by reference to the full text of the Global Funding Agreement and the project funding agreements, which are filed as exhibits to this Annual Report, and which are incorporated by reference in their entirety. License Agreement – St George Street and AstraZeneca In August 2019, St George Street entered into a license agreement with AstraZeneca (the “AZ License Agreement”), pursuant to which AstraZeneca granted an exclusive worldwide license to St George Street, under certain AstraZeneca patents and know-how, to exploit the pharmaceutical compounds known individually and together as AZD5904 (Myeloperoxidase Inhibitor) and AZD1656 (Glucokinase Activator). The AZ License Agreement also included any additional compounds to be developed by St George Street and any product that is comprised of or contains any such licensed compound pertaining to the field of idiopathic male infertility for the licensed compound AZD5904 and in the field of renal transplant for the licensed compound for AZD1656. Under the AZ License Agreement, for a period of 60 days following AstraZeneca’s receipt of a proof of concept study for any licensed compound, AstraZeneca retains an exclusive right of first negotiation to transfer all development, commercialization, or other ongoing planned activities related to such licensed compound, to AstraZeneca or any of its affiliates, and to undertake future exploitation of such licensed compound. Subject to the foregoing negotiation right, St George Street has the right and obligation to develop each licensed compound at its sole cost and expense in accordance with the development plan set forth in the AZ License Agreement, and the right to grant sublicenses to its affiliates and other persons with respect to each licensed compound. Any sublicense shall be consistent with, and expressly made subject and subordinate to, the terms and conditions of the AZ License Agreement, and St George Street shall cause each sublicensee to comply with the applicable terms and conditions of the AZ License Agreement. The development plan for each licensed compound shall be managed by a joint coordination committee consisting of representatives from each party to the agreement. St George Street is required to pay AstraZeneca a share of any revenue payable to St George Street by any sublicensee according to the relevant sublicense (the “Sublicense Revenue”), which shall be calculated based on the amounts payable to St George Street by the sublicensee gross of tax, and shall include any upfront, milestone, or royalty payments payable. The percentage of Sublicense Revenue payable to AstraZeneca is 60% for Sublicense Revenue that is less than $10 million; 50% for Sublicense Revenue that is equal to or greater than $10 million but less than $15 million; and 40% for Sublicense Revenue that is equal to or greater than $15 million. The term of the AstraZeneca License Agreement commences on the effective date of that agreement and, unless earlier terminated in accordance therewith, continues until the date of expiration of the last royalty term for the last licensed product. Following the expiration (but not earlier termination) of the royalty term for a licensed product in a country, the license grant set forth in this agreement shall become non-exclusive, fully-paid, and irrevocable for such licensed product. 3 The AZ Agreement is terminable by either party if the other party is in material breach of the agreement, and such breach has not cured the breach 90 days of notice (or 10 days of notice with respect to a payment breach). AstraZeneca may immediately terminate the agreement, including the rights of any sublicensees, upon written notice if St George Street or any of its affiliates or sublicensees, anywhere in the territory, institutes, prosecutes or otherwise participates in any claim, demand, action or cause of action for declaratory relief, damages or any other remedy or for an enjoinment, injunction or any other equitable remedy alleging that any claim in an AstraZeneca patent is invalid, unenforceable or otherwise not patentable or would not be infringed by St George Street’s activities absent the rights and licenses granted under the agreement. AstraZeneca may also terminate the agreement upon 30 days’ prior written notice if St George Street ceases development of all licensed compounds and all licensed products and a licensed product is not being commercialized in the territory by or on behalf of St George Street. St. George Street may terminate its activities under the agreement for convenience, on a project-by-project basis, upon reasonable notice to AstraZeneca. St George Street may also cease its activities under any development plan of a licensed compound if the joint commercialization committee determines that it is inappropriate to continue such plan for scientific, safety, or for ethical reasons, or that a licensed product no longer meets an unmet medical need. In 2020, St George Street and AstraZeneca entered into an amendment to the AZ License Agreement to add Covid-19 to the field for licensed compound AZD1656. St George Street and AstraZeneca entered into a second amendment and a third amendment to the AZ License Agreement. The second amendment, dated April 9, 2020, to the AZ License Agreement added Schedule 1.36(a) to the AZ License Agreement, which describes additional terms and conditions that apply only to the parties with respect to Covid-19 for the licensed compound AZD1656. The third amendment, dated April 27, 2021, added Hashimoto’s thyroiditis, uveitis, preterm labor, and Covid-19 to the field for AZD1656 and added Schedule 1.42(a) to the AZ License Agreement, which describes additional terms and conditions that apply to the parties (i) only with respect to Hashimoto’s thyroiditis, uveitis, and preterm labor for the licensed compound AZD1656, and (ii) with respect to all other indications and Licensed Compounds (as defined in the AZ License Agreement) as set forth in the AZ License Agreement, except with respect to Covid-19 for AZD1656, for which Schedule 1.36(a) of the AZ License Agreement applies. The terms and conditions contained in the second and third amendments to the AZ License Agreement also set forth the obligations and responsibilities of the parties regarding supply of study drugs, conducting studies, and other matters. 4 Market Overview Global Biotechnology Industry The global biotechnology industry comprises a large range of companies engaged in diverse activities, such as biopharmaceutical development. The industry companies also span across a wide spectrum of operational models. Some small, dedicated biotechnology companies are research and development (“R&D”) intensive and operate primarily with venture capital, grants, initial public offerings and collaborative agreements. Conversely, large, diversified companies hold significant in-house R&D resources and well-established production, commercialization, and distribution processes. Management believes that the global biotechnology market was valued at $1.55 trillion in 2023 and is projected to grow at a compound annual growth rate (“CAGR”) of 13.96% from 2024 to 2030. The market is driven by strong government support through initiatives aimed at the modernization of regulatory framework, improvements in approval processes and reimbursement policies, as well as standardization of clinical studies. Global investor confidence has fallen during the period, which served to somewhat subdue revenue growth. However, global investment in R&D has grown strongly and consistently in recent years, with much of this funding funneled into medical biotechnology development, aimed at providing better care for the aging global population, thus bolstering industry revenue. Global Pharmaceutical Industry Over the previous five years, pharmaceutical companies have benefited from an aging population in developed economies and a growing middle class in emerging economies. Many companies have also tapped into regional demand for pharmaceuticals that may differ from developed markets and have expanded their global presence to tap into regional market needs. Patent cliffs have continued to hamper industry revenue during the current period. When drugs lose patent exclusivity, the market is inundated with low-cost generic drugs. As manufacturers contend with more price-based competition from generics, many operators respond by lowering their R&D expenditures, which limits the industry’s drug pipelines. Additionally, many governments and health insurance organizations have reduced their drug reimbursements to control healthcare costs, such as implementing incentives for patients to use generic drugs. Moving forward, revenue is forecast to grow an annualized 3.2% to $1.3 trillion over the next five years amid an anticipated persistence of global demand for industry products. Our Initial Pipeline: AZD1656 and AZD5904 We wholly own the intellectual property and the rights to further develop the solid-form patent pending Cocrystals of AZD1656 (AZD1656 Cocrystal WO2023084313 - Patent Expires 02/09/2042) which we intend to target a wide range of autoimmune diseases. In addition, we currently have the exclusive rights to develop clinical assets, AZD1656 and AZD5904, which are licensed to St George Street by AstraZeneca, in five indications. Due to our relationship with St George Street, we intend to leverage the data generated from these historical trials in order to investigate the efficacy and safety to AZD1656 to potentially treat HT, uveitis, preterm labor, and renal transplant patients, and the efficacy and safety of AZD5904 to treat IMI. AZD1656 has undergone testing in a total of 20 Phase I clinical trials and five Phase II clinical trials conducted by AstraZeneca since 2008 and 19 of which were conducted in the U.S. Additional information about those clinical trials is available at the U.S. National Library of Medicine’s website at www.clinicaltrials.gov (however, the information contained on or otherwise accessible through such website is not part of this Annual Report). AZD5904 has undergone testing in five Phase I clinical trials conducted by AstraZeneca, one of which was conducted in the U.S. While a significant amount of clinical trial data has already been generated for both AZD1656 and AZD5904, some of this data was generated outside of the U.S. and accordingly may not be accepted by the FDA. In the event that such data is not accepted by the FDA, additional clinical trials may be required, which would result in additional costs and time to develop these clinical assets. 5 The table below sets forth the pre-clinical or clinical trials that have been conducted by or at the direction of AstraZeneca to date on the particular clinical asset. All of these pre-clinical or clinical trials were conducted by AstraZeneca prior to AstraZeneca entering into its license agreement with St George Street. None of the pre-clinical or clinical trials that have taken place to date were conducted by or at the direction of the Company. Asset Therapeutic Area Stage of Development Location of Trials AZD1656 Type 2 Diabetes Preliminary, Phase I and Phase II United Kingdom; United States AZD1656 Renal Transplant Patients with Type II Diabetes Preliminary, Phase I and Phase II United Kingdom AZD1656 Covid-19 Preliminary, Phase I United Kingdom AZD5904 Idiopathic Male Infertility Preliminary, Phase I European Union; United States The following table sets forth the current asset development stage for each of AZD1656 and AZD5904 for the indications noted below. Asset Therapeutic Area Assets at Their Present Stage of Readiness (1) Next Stage of Development to be Conducted by Conduit Anticipated Exit Stage for Monetization (3) Phase I Phase II Phase III AZD1656 Hashimoto’s Thyroiditis & Grave’s Disease Phase II Following completion of Phase II AZD5904 Idiopathic Male Infertility Phase II Following completion of Phase II AZD1656 Uveitis Phase II Following completion of Phase II AZD1656 Preterm Labor Phase II Following completion of Phase II AZD1656 Renal Transplant Phase II Following completion of Phase II AZD1656 Covid-19, Long Covid N/A (2) N/A (2) (1) Indicates that the asset is considered ready for this Phase. For example, if an asset is listed under Phase II, this means that the asset has already completed Phase I trials and is therefore considered Phase II ready. (2) We do not intend to provide additional funding to develop AZD1656 for Covid-19. However, we are entitled to a portion of the revenues in the event that AZD1656 is further developed by St George Street (or another third party) and is monetized, whether through a sale, license agreement, or otherwise. (3) Reflects the stage at which we currently anticipate that we will seek to monetize such assets through a license, royalty, or other transaction with a third party, who would then seek to continue the development of such clinical asset until its potential commercialization after Phase III clinical trials were completed. There is no assurance that we will be able to monetize such assets by entering into a license, royalty, or other transaction with a third party. In addition, there is no assurance that any of the clinical assets licensed or owned by us will successfully complete Phase II or Phase III clinical trials or obtain regulatory approvals, or that such assets will be monetized or commercialized. 6 AZD1656 was subject to Phase I and Phase IIa clinical trials consisting of 23 studies in 526 subjects, 446 of whom were dosed with AZD1656. Other than for the intended effect of lowering glucose, there were no difference identified between the AZD1656-treated and placebo-treated subjects relating to adverse events. All of cases where low glucose levels were identified were managed by the patients and resolved. Based on these clinical trials, no safety signals were identified regarding vital signs, safety laboratory values or electrocardiogram data. No deaths occurred in any studies with healthy volunteers or patients. AZD1656 was also subject to Phase II clinical trials consisting of two studies where AZD1656 was given to patients with Type 2 Diabetes Mellitus for four months or longer. In total, there were 754 randomized patients, 516 of whom were exposed to AZD1656 (316 men and 200 women). There were no clinically important differences in the adverse effects profile between the AZD1656 treatment group and the AZD1656 placebo group and there were no deaths in either of the Phase II studies. The efficacy of AZD1656 as a potential treatment for diabetes was also assessed during the Phase II clinical trials, including whether the efficacy was statistically significant. Clinically relevant and statistically significant reductions in HbA1c were seen after four months; however, the initial improvement in glucose control deteriorated over time and the change in HbA1c levels after four months were not statistically different than the placebo. This decreasing efficacy over time was seen in both Phase II studies. AZD5904 was subject to five Phase I clinical studies, with a total of 1181 subjects being exposed to AZD5904. Single doses of up to 1200 mg and multiple doses of up to 325 mg for up to three times per day for 21 days have been administered as an oral solution in the completed clinical studies. In addition, single doses of up to 1400 mg and multiple doses of up to 600 mg for 10 days have been administered as an “extended release” formulation. The data from these studies did not identify any expected adverse drug reactions for AZD5904 and no adverse effects were reported as related to AZD5904. In addition, the data revealed no clinically significant changes in blood pressure or pulse rate related to AZD5904 and electrocardiogram data was within the physiological range for the population studied. The effect of AZD5904 on human myeloperoxidase, which we refer to as MPO, activity was evaluated by determination in an ex vivo assay of MPO activity in plasma. The correlation between MPO activity and plasma concentrations was assessed for single and multiple doses of AZD5904. A relationship between plasma concentrations of AZD5904 and MPO activity was demonstrated, which indicates that AZD5904 may be an effective inhibitor of MPO activity in humans. However, Phase I trials do not assess statistical significance so additional Phase II trials are necessary to determine if the inhibition of MPO activity as a result of AZD5904 is statistically significant. 7 AZ1656 in Autoimmune Diseases Autoimmune diseases refers to a broad group of diseases and conditions that arise from an abnormal immune response to a functioning body part. For example, autoimmune diseases may arise from an abnormal immune response of major organs (i.e., the heart, kidneys, bladder, liver, lungs, and skin), glands (i.e., the adrenal gland, pancreas, thyroid, or reproductive organs), digestive system, and tissue (i.e., blood, connective tissue, muscle, eyes, ears, or vascular system). Management believes that there are over 80 types of autoimmune diseases that have been identified, including lupus, celiac disease, multiple sclerosis, rheumatoid arthritis, psoriasis, and inflammatory bowel disease. Autoimmune diseases are often difficult to diagnose and often the cause of the disease is not known. It is estimated by the American Autoimmune Related Diseases Association (“AARDA”) that as many as 50 million Americans are living with an autoimmune disease – at a cost of $86 billion a year and there is presently no totally effective treatment known to management. The currently available treatments for autoimmune diseases include non-steroidal anti-inflammatory drugs (“NSAIDS”) or immune suppressants. These treatments often improve the symptoms but ultimately do not cure the disease and often involve side effects. AZD1656 is a highly specific glucokinase activator; originally developed by AstraZeneca for use in diabetes mellitus. It has now been tested in over 1,000 patients with both type I and II diabetes and no significant safety concerns have been raised. It was most recently tested in the ARCADIA Phase II trial in diabetic patients hospitalized with Covid-19 on the basis of new research into immunometabolic modulation. We believe that AZD1656 may be used to activate a patient’s own immune system in order to limit harmful inflation. We have identified several autoimmune diseases, which reflects good market potential, with a high level of need that may be treatable using AZD1656. We believe that our clinical assets have the potential to treat numerous autoimmune diseases. We intend to initially focus on the indications below in order to maximize the commercial potential of our clinical assets. Thyroid Disease: Hashimoto’s Thyroiditis Disease Hashimoto’s Thyroiditis (“HT”) is an autoimmune disease involving the improper functioning of the thyroid. HT is an autoimmune disease driven by T cells, which are one of the types of white blood cells, where the immune system attacks the thyroid gland. Management believes that HT is the most prevalent autoimmune thyroid disease worldwide and anticipates that the prevalence of HT will continue to increase due to rising obesity and the rising prevalence of other autoimmune disorders that made patients more susceptible to HT. The current treatment for HT involves hormone replacement therapy with levothyroxine. However, determining the appropriate dose for each individual is complex with the individual needing to continue hormone replacement therapy for the rest of his or her life while still suffering with some symptoms of HT. Under the current treatment, the patient is monitored by measuring Thyroid-Stimulating Hormone levels (“TSH”). In addition, this difficulty in titrating the appropriate dose of levothyroxine leads to a high burden of medical appointments and the risk of development of comorbidities, including cardiovascular disease. Management believes that the global thyroid gland disorders treatment market was valued at $2.23 billion in 2021 and is set to grow from $2.37 billion in 2023 to $2.95 billion by 2030, at a CAGR of 3.17% during the forecast period (2023-2030). 8 AZD1656 was previously subject to preclinical and clinical trials, including Phase I and Phase II trials, conducted by AstraZeneca relating to its potential to treat type 2 diabetes. As of the date hereof, no preclinical or clinical trials have been conducted on the use of AZD1656 to treat HT. We intend to conduct further trials on AZD1656 relating to HT. We plan to conduct further research on AZD1656 to investigate if AZD1656 is a treatment option for HT, including investigating any negative side effects in the use of AZD1656 as compared to the currently available treatment options for HT. We, in connection with a CRO, have prepared clinical trial protocols for the use of AZD1656 in HT in a Phase II clinical trial: a Phase II, randomized, double-blind, placebo-controlled study to evaluate the efficacy and safety of AZD1656 in patients with HT with an anticipated enrollment of 200 patients. Pharmaceutical companies typically find market entry for HT clinical assets challenging due to the manufacturing complexities and careful consideration of manufacturing product, which are usually patented or trade secrets of companies. Due to its relationship with St George Street, we have sufficient API to conduct Phase II clinical trials on AZD1656 for the treatment of HT. There can be no assurances that the clinical trials that we intend to conduct on AZD1656 to treat HT will be successful. Uveitis Uveitis is an autoimmune disease of the eye that refers to a number of intraocular inflammatory conditions and involves the swelling of the uvea, the colored portion of the eyes. Management believes that in the U.S. uveitis causes an estimated approximately 30,000 new cases of blindness per year and may be the third leading cause of blindness worldwide. 3 Unlike other leading causes of blindness, uveitis is particularly prevalent in younger working-age people. Uveitis has a prevalence of around 40-100 per 100,000 persons, and can be subdivided into specific conditions, so it qualifies as a rare disease. 4 We believe that a treatment for non-infectious uveitis would be eligible for orphan drug designation, which provides for market exclusivity of 10 years in the European Union and seven years in the United States. The global uveitis market size was valued at $456 million in 2022 and is estimated to reach $837 million by 2030, growing at a CAGR of 4.8% during the forecast period (2023-2030). 3 “Epidemiology of uveitis in a US population-based study,” by Marta Mora Gonzalez, Marisee Masis Solano, Travis C. Porco, Catherine E. Oldenburg, Nisha R. Acharya, Shan C. Lin, and Matilda F. Chan (Link: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5904090/) 4 “Epidemiology and risk factors in non-infectious uveitis: a systemic review,” by Katherine A. Joltikov and Anne-Marie Lobo-Chan (Link: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8461013/ ). Steroids, which can cause elevated intraocular pressures and cataracts, are often used to manage uveitis. Most patients develop elevated intraocular pressures and/or cataracts after long-term treatment with steroids and may have to switch therapies or the disease may become resistant to steroid treatment. Biological drugs have been developed but these are expensive and not always effective as many patients still go blind every year. AZD1656 was previously subject to preclinical and clinical trials, including Phase I and Phase II trials, conducted by AstraZeneca relating to its potential to treat type 2 diabetes. As of December 31, 2023, no preclinical or clinical trials have been conducted on the use of AZD1656 to treat uveitis. We, in connection with a CRO, have prepared clinical trial protocols relating to the use of AZD1656 in uveitis in a Phase II clinical trial: a Phase II, double-blind, placebo-controlled study to evaluate the efficacy and safety of ADZ1656 in patients with non-infectious uveitis with an anticipated enrollment of 120 patients. We intend to conduct further trials on AZD1656 in order to investigate if AZD1656 is an option to treat uveitis without the side effects involved in the current treatment using steroids. There can be no assurances that the clinical trials that we intend to conduct on AZD1656 to treat uveitis will be successful. 9 Renal Transplant Failure Renal transplant failure occurs when a patient’s body rejects a kidney transplant and involves the gradual decrease in kidney function that starts following a kidney transplant surgery and often results in organ failure. According to the United Network for Organ Sharing, there are around 93,000 patients waiting for a kidney transplant in the U.S. The United Network for Organ Sharing reports that the prevalence of chronic kidney disease is rising due to other conditions, such as diabetes, and as a result of an aging population. The Organ Procurement & Transplantation Network reported that during 2023, over 46,000 individuals received an organ transplant and all-time volume records were set for kidney transplants of 27,329. 6 Management believe that the global kidney transplant market is estimated to be valued at $5.8 billion in 2021 and is expected to register a CAGR of 4.2% through to 2033. The current treatment for renal transplant failure involves using immunosuppressives to suppress the patient’s immune system, which has numerous side effects including high blood pressure, weight gain, diabetes, dyslipidemia and some cancers. Malignancy, which refers to uncontrolled growth and division of abnormal cells, is one of the most common causes of death in kidney transplant recipients. Immunosuppressives are a major contributing factor to malignancy. AZD1656 was previously subject to preclinical and clinical trials, including Phase I and Phase II trials, conducted by AstraZeneca relating to its potential to impact on renal transplant patients with type 2 diabetes. We believe that AZD1656 may facilitate the immune system in tolerating or accepting the transplanted kidney. We intend to conduct Phase II studies on AZD1656 to investigate if AZD1656 decreases the rejection in kidney transplant patients. We are currently working with a CRO to prepare protocols for clinical trials to investigate the use of AZD1656 to reduce the rejection in kidney transplant patients. There can be no assurances that the clinical trials that we intend to conduct on AZD1656 to treat renal transplant patients will be successful. Preterm Labor Preterm labor refers to labor that begins before 37 weeks of pregnancy. Preterm labor may result in premature birth and the earlier the premature birth happens, the greater the of health risks for the baby. According to an article published in PubMed, globally, 14.84 million babies were preterm births. 8 Preterm labor is a condition that may result in the death of the baby and/or the mother. There is no effective treatment for preterm labor that is known to us. Management believes that approximately 60,000 babies per year in the U.K. according to the Mums and Midwives Awareness Academy and approximately 380,000 per year in the U.S. are born preterm according to the Preeclampsia Foundation. Globally, prematurity is the leading cause of death in children under the age of five years, and preterm labor rates are increasing. For example, according to the Centers for Disease Control and Prevention, in the U.S., the preterm labor rate rose for the fifth straight year in 2019. For 2021, the preterm labor rate in the U.S. was approximately 10.5%. According to the World Health Organization, the rates of preterm labor by country range from approximately 5% to approximately 18%. Management believe that the global preterm birth prevention and management market size is estimated to stand at $1.70 billion in 2024. As both developed and developing countries embrace therapeutics for preventing and managing preterm birth, the market is expected to exceed a valuation of $4.49 billion by 2034, registering a CAGR of 10.2%. Preterm labor results in increases costs, both higher costs of labor and neonatal care, and often results in additional medical care during the child’s lifetime for those that are born prematurely. Accordingly, the reduction in preterm labor would have a significant health and economic impact. 6 https://optn.transplant.hrsa.gov/news/continued-increase-in-organ-donation-drives-new-records-in-2023- new-milestones-exceeded/ 8 https://pubmed.ncbi.nlm.nih.gov/36964535/ 10 AZD1656 was previously subject to preclinical and clinical trials, including Phase I and Phase II trials, conducted by AstraZeneca relating to its potential to treat type 2 diabetes. As of the date hereof, no preclinical or clinical trials have been conducted on the use of AZD1656 to treat preterm labor. Specially, we intend to conduct a Phase II study on the use of AZD1656 to assist in maintaining pregnancy beyond 37 weeks. We, in connection with a CRO, have prepared clinical trial protocols relating to the use of AZD1656 in preterm labor in a Phase II clinical trial: a multicenter, randomized, double-bind, placebo-controlled Phase II clinical trial evaluating the efficacy and safety of AZD1656 in the prevent of preterm labor with an anticipated enrollment of 200 patients. In the event that AZD1656 is shown to be able to effectively treat preterm labor (of which there can be no assurance), AZD1656 could potentially maintain a pregnancy for longer, reduce the number of babies that are born prematurely and reduce the costs associated with preterm labor. There can be no assurances that the clinical trials that we intend to conduct on AZD1656 to treat preterm labor will be successful. Most drugs for preterm labor are only used for about 24-48 hours once a woman is already in labor, so that the patients can be treated with corticosteroids to promote the functioning of the baby’s lungs. These drugs are unable to sustain a pregnancy beyond this and are not safe to be used for prolonged periods. We believe that, in the event that AZD1656 is shown to be able to effectively treat preterm labor (of which there can be no assurance), AZD1656 could potentially maintain a pregnancy for longer, reduce the number of babies that are born prematurely and reduce the costs associated with preterm labor. AZD1656 in Infectious Diseases – Covid-19 and Long Covid Covid-19 is a disease caused by a virus named SARS-CoV-2, which refers to severe acute respiratory syndrome coronavirus 2, and is a strain of the coronavirus, which is a respiratory illness. We continue to have an economic interest in AZD1656 for treatment of Covid-19 and have included AZD1656 for the treatment of Covid-19 in our pipeline. However, at this time, we do not intend to provide additional funding to develop AZD1656 for Covid-19. However, we are entitled to a portion of the revenues in the event that AZD1656 is further developed by St George Street or other third parties and is monetized, whether through a sale, license agreement, or otherwise. While we do not intend to further fund the research and development of the use of AZD1656 in Covid, we retain an economic interest in the clinical asset and if such asset is further developed through funding provided by other third parties, then we may be entitled to receive compensation from those development activities conducted by third parties. There can be no assurances that AZD1656 will be further developed or commercialized for the treatment of Covid-19 or Long Covid. AZD5904 in Idiopathic Male Infertility Idiopathic Male Infertility (“IMI”) is defined as failure of a couple to conceive after one year of regular sexual intercourse where the physical examination and endocrine laboratory testing of the male are normal, but semen analysis reveals sperm abnormalities. Approximately 15% of couples globally, or 48.5 million couples globally, are infertile and that 30% of infertility cases can be attributed solely to the female, 30% can be attributed solely to the male, 30% can be attributed to a combination of both partners, and 10% of cases have an unknown cause. 8 According to the National Library of Medicine, male infertility accounts for 30% of infertility cases and its prevalence in the general population approximately ranges between 9 and 15%. 9 Our management believes that male sperm counts have declined in Western men and will continue to decline due, in part, to increasing rates of diseases such as obesity and diabetes that can reduce fertility. IMI affects families worldwide and is inherent in problems of reproduction. Currently, there are no specific treatments for male infertility, and we are not aware of any other company that is developing a treatment for male infertility. There are no approved pharmacotherapies for idiopathic male infertility. Lifestyle medicine and unproven supplements are often used. Intracytoplasmic sperm injection, a form of in vitro fertilization, is the only treatment currently available for male infertility. This process is not a treatment of male infertility but rather is an alternative means of fertilizing the egg. In vitro fertilization places a significant burden on the woman as it requires the induction of egg production and harvesting of eggs. In vitro fertilization is costly and time consuming and has modest success rates. Management believes that the male infertility market size is expected to grow from $3.72 billion in 2023 to $4.42 billion by 2028, at a CAGR of 3.54% during the period 2023-2028. 8 “A unique view on male infertility around the globe,” by Ashok Agarwal, Aditi Mulgund, Alaa Hamada, and Michelle Renee Chyatte (Link: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4424520/). 9 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10057583/#B1-jcm-12-02366 11 Damaged sperm are unable to successfully fertilize eggs due to factors including impaired motility, impaired ability to penetrate and/or DNA damaged sperm that is unable to form a viable fetus. Our development pipeline for AZD5904 includes a potent, irreversible inhibitor of human myeloperoxidase, which we refer to as MPO, that has the potential to treat idiopathic male infertility. AZD5904 was investigated by AstraZeneca for the treatment of idiopathic male infertility in Phase I trials, which confirmed the suitability to progress to Phase II trials. While AZD5904 is Phase II ready, our management intends to conduct a Phase Ib “proof of mechanism” trial to verify AZD5904 has the intended biological effect in semen (as well as in blood) prior to commencing a Phase II trial for the use of AZD5904 to treat idiopathic male infertility. Specifically, our management intends to conduct the Phase Ib study in order to see if the trial will provide evidence that AZD5904 has its intended effect of inhibiting myeloperoxidase and reduce oxidative stress in semen. We believe that AZD5904 has the potential to be used to create a tablet that could treat IMI and would be the first drug developed to directly treat IMI. We, in connection with a CRO, have prepared clinical trial protocols relating to the use of AZD5904 to treat IMI in a Phase Ib clinical trial: a Phase Ib, randomized, double-blind, placebo-controlled, dose escalation study to evaluate the safety, tolerability and preliminary efficacy of AZD5904 in adult men with IMI with an anticipated enrollment of 60 patients, and a Phase II clinical trial: a Phase II, randomized, double-blind, placebo-controlled clinical trial to evaluate the efficacy and safety of AZD5904 in the treatment of IMI with an anticipated enrollment of 200 patients. There can be no assurances that the clinical trials that we intend to conduct on AZD5904 to treat idiopathic male infertility will be successful. Future Clinical Assets As part of our strategic planning process, we intend to explore the efficacy of using AZD1656 to treat other diseases. Specifically, we intend to conduct research on whether AZD1656 may be effective treating other autoimmune diseases, include systemic lupus erythematosus, ANCA vasculitis, rheumatoid arthritis, multiple sclerosis, motor neuron disease, and amyotrophic lateral sclerosis. As part of our strategic planning process, we intend to explore the efficacy of using AZD1656 to treat other diseases. We also plan to further develop the co-crystals that we own from our prior development work on AZD1656, including to research the ability of the co-crystals developed from AZD1656 to treat psoriasis, Crohn’s disease, lupus, sarcoidosis, diabetic wound healing, idiopathic pulmonary fibrosis, and nonalcoholic steatohepatitis. In addition, we currently intend to explore the use of AZD5904 for the treatment of glioma. Due to our on-going relationship with St George Street, from time to time, there may be additional clinical assets that we are able to partner with St George Street to develop. We expect to seek to develop other clinical assets and determine based on pre-clinical and clinical data which clinical assets in order to determine which assets in our pipeline to continue to develop. Accordingly, we believe that our management team will be able to effectively allocate resources to the development of clinical assets that we believe show the most promise. However, there can be no guarantee that the clinical trials conducted by us of our clinical assets will be successful. If we are unable to commercialize our clinical assets or experience significant delays in doing so, our business will be materially harmed. Manufacturing We do not currently own or operate any facilities to formulate, manufacture, test, store, package, or distribute any of the clinical assets that we are developing or may seek to develop and do not currently have the capabilities to conduct such activities. We currently plan to rely on third parties to manufacture, store, and test the clinical assets that we seek to develop, including material manufactured originally by AstraZeneca. We will depend on third-party suppliers and manufacturing organizations for all our required raw materials and drug substance and to formulate, manufacture, test, store, package, and distribute clinical trial quantities of clinical assets that we may seek to develop. We plan to continue to use third-party suppliers and manufacturing organizations and we anticipate expanding our network of third-party suppliers and manufacturing organizations as our operations expand. 12 We have internal personnel and utilize consultants with extensive technical, manufacturing, analytical, and quality experience to oversee our contract manufacturing and testing activities. Manufacturing is subject to extensive regulations that impose procedural and documentation requirements, including, but not limited to, record-keeping, manufacturing processes and controls, personnel, quality control, and quality assurance. Our systems, procedures, and contractors are required to be in compliance with these regulations and are assessed through regular monitoring and formal audits. Research and Development Our research and development activities have included developing co-crystals of AZD1656 to increase patent life. Some of this work was completed by third-party CROs but all intellectual property is retained by us. The successful completion of clinical trials increases the value of clinical assets and may lead to the commercialization and/or licensing of such assets to other pharmaceutical companies. There is no assurance that any clinical trials on the assets owned or licensed by us will be successful or any assurance our co-crystal development will be successful. We do not intend to further fund the research and development of the use of AZD1656 in Covid; however, we retain an economic interest in the clinical asset and if such asset is further developed through funding provided by other third parties, then we may be entitled to receive compensation from those development activities conducted by third parties due to its economic interest in AZD1656 in Covid. Sales and Marketing We do not currently have marketing, sales, or distribution capabilities. In order to commercialize any clinical asset that is approved for commercial sale, we must either develop our own sales, marketing, and distribution infrastructure or collaborate with third parties that have such commercial infrastructure and relevant marketing and sales experience. We anticipate relying on licensing, co-sale, co-promotion, and distribution agreements with strategic partners for the commercialization of our products. We do not currently anticipate that we would develop our own internal sales force organization. Competition We operate in the highly competitive pharmaceutical and biotechnology industry. Our competitors may include public and private companies, universities, governmental agencies, and other research organizations actively engaged in the research and development of clinical assets and biopharmaceutical products. Our competitors may have greater financial, technical, and human resources than we currently have and/or may be better equipped to develop, manufacture, and market their products. Our competitors may be developing clinical assets for products for similar indications. However, we believe that we have an unprecedented advantage in novelty. As discussed above, AZD1656 is an activator (not an inhibitor) of a metabolic process. We anticipate that the number of companies seeking to develop clinical assets, biopharmaceutical products, and therapies will continue to increase. As a result, the competition we face may also increase. However, both in the treatment of autoimmune disease and idiopathic male infertility the competition is currently expected to come in years, even if biopharmaceutical products that we develop and/or commercialize were not to compete with products of our competitors based on the product efficacy, safety, ease of use, price, demonstrated cost-effectiveness, marketing effectiveness, service, reputation, and access to technical information. However, we believe that our ability to focus on clinical assets that have been deprioritized by larger pharmaceutical companies is a competitive advantage. Intellectual Property We hold exclusive rights to develop AZD1656 and AZD5904 through our Global Funding Agreement with St George Street and we also own the intellectual property and the rights to further develop co-crystals resulting from our prior research and development work on AZD1656. 13 We currently have one pending international patent application and two pending national patent applications. Even though we have filed patent applications, there is no guarantee that the validity of the patents will be upheld if challenged by a third party, that patents will be granted on the applications filed in the respective jurisdictions, or that once granted, the patents will contain claims that encompass our commercial products. There can be no assurance that any of our intellectual property rights will afford us any protection from competition. The following patent applications are relevant to the operation of our business: Related Clinical Asset Mechanism of Action Patent Information and Number Patent Ownership/Licensing Status; Patent Status Jurisdictions Protected Expiration AZD1656 Glucokinase Activator Composition of Matter Patent; 101901 (family number) Licensed to St George Street Capital from AstraZeneca for use in thyroiditis, uveitis, pre-term labor, renal transplant failure. Granted and in force. Australia, Brazil, Canada, Switzerland, China, Germany, European Procedure, Spain, France, United Kingdom, Hong Kong, India, Japan, South Korea, Mexico, Netherlands, Russian Federation, Sweden, Turkey, United States Expires July 3, 2026. AZD1656 Glucokinase Activator Polymorph Patent; 103631 (family number) Licensed to St George Street Capital from AstraZeneca for use in thyroiditis, uveitis, pre-term labor, renal transplant failure. Granted and in force. China and United States Expires February 2030. AZD1656 Glucokinase Activator Co-crystal PCT/IB2022/00075 Owned by Conduit Pharmaceuticals. Filed September 2, 2022. Global Filing date September 2, 2022. If granted, will expire September 2, 2042. AZD5904 MPO Inhibitor Idiopathic Male Infertility; AZD5904 use patent; 200644 (family number) [WO/2019/016074] Licensed to St George Street Capital from AstraZeneca. International Description Expires July 12, 2038. We have not filed any applications for trademark protection of any names or logos for products or technologies in development. We plan to seek trademark protection inside and outside of the United States where and when appropriate and if available. We intend to use these registered marks in connection with our pharmaceutical research and development, including proprietary technologies, as well as our clinical assets. We expect to protect our products and technologies through a combination of patents, regulatory exclusivity, and potentially confidential and proprietary know-how. We intend to actively seek to obtain, where appropriate, the broadest commercially reasonable intellectual property protection possible for our clinical assets and technologies, including any future clinical assets and technologies under development, our proprietary information, and our proprietary technology through a combination of contractual arrangements and patents, in the United States and abroad. However, we cannot guarantee that patent protection will provide complete protection against competitors who seek to circumvent our patents. 14 Government Regulation and Product Approval Government authorities in the United States, at the federal, state, and local level, and in other countries, extensively regulate, among other things, the research, development, clinical trials, testing, manufacture, including any manufacturing changes, authorization, pharmacovigilance, adverse event reporting, recalls, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, import and export of pharmaceutical products and clinical assets, including clinical assets such as those we are developing. The processes for obtaining regulatory approvals in the United States and in foreign countries, along with subsequent compliance with applicable statutes and regulations have no guaranteed outcomes and require the expenditure of substantial time and financial resources. Our development plan for each of AZD1656 and AZD5904 is to conduct clinical trials and if those trials are successful, we will then seek to enter into a transaction with a third party with respect to AZD1656 orAZD5904, as applicable, for the particular indication. We do not intend to continue development of such clinical assets beyond Phase II clinical trials. Accordingly, we anticipate developing clinical assets, which we own or license from third parties, that have undergone pre-clinical and clinical trials through the Phase II stage and then monetizing such clinical assets through a license, royalty, or other transaction. We do not expect that we will commercialize any clinical assets or seek marketing approval from the FDA (or similar organizations) as we intend to enter into agreements with third parties following Phase II clinical trials for each such clinical asset that would provide that such third party would pursue the further development, commercialization, and marketing of such assets. The following description of the process relating to obtaining regulatory approvals in the United States and in foreign countries is intended for informational purposes only as we do not expect to continue the development of any of the clinical assets beyond the Phase II stage. There is no assurance that any clinical trials on the assets owned or licensed by us will be successful. United States Government Regulation In the United States, the U.S. Food and Drug Administration (“FDA”) regulates drugs under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and implementing regulations. Failure to comply with the applicable United States requirements at any time during the product development process, approval process or after approval, may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending New Drug Applications (“NDAs”), withdrawal of an approval, imposition of a clinical hold, issuance of warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement or civil and/or criminal penalties. The process required by the FDA before a drug may be marketed in the United States generally involves the following steps, each of which requires the expenditure of substantial time and financial resources: ● completion of preclinical laboratory tests, animal studies and formulation studies in compliance with good laboratory practices (“GLPs”) and other applicable regulations; ● submission to the FDA of an Investigational New Drug Application (“IND”), which must become effective before human clinical trials may begin; ● approval by an independent institutional review board (“IRB”) at each clinical site before each trial may be initiated; ● performance of well-controlled human clinical trials in accordance with good clinical practices (“GCPs”), which may include placebo controls, to establish the safety and efficacy of the proposed drug product for each indication; ● submission to the FDA of an NDA and payment of fees; ● satisfactory completion of an FDA advisory committee review, if applicable; ● satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with current good manufacturing practices (“cGMPs”) and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity; ● satisfactory completion of audits of clinical trial sites conducted by FDA to assure compliance with GCPs and the integrity of clinical data; and ● FDA review and approval of the NDA. 15 Preclinical Studies Preclinical studies include laboratory evaluation of product chemistry, toxicity, and formulation, as well as animal studies to assess potential safety and efficacy. Preclinical tests intended for submission to the FDA to support the safety of a clinical asset must be conducted in compliance with GLP regulations and the U.S. Department of Agriculture’s Animal Welfare Act. A drug sponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data and any available ex-U.S. clinical data or relevant literature, among other things, to the FDA as part of an IND. Some nonclinical testing may continue even after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials and places the clinical trial on a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence. A clinical hold may occur at any time during the life of an IND and may affect one or more specific studies or all studies conducted under the IND. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an Institutional Review Board (“IRB”) can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug candidate has been associated with unexpected serious harm to patients. Clinical Trials Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include the requirement that all research subjects provide their informed consent in writing for their participation in any clinical trial along with the requirement to ensure that the data and results reported from the clinical trials are credible and accurate. Clinical trials are conducted under protocols detailing, among other things, the objectives of the trial, the criteria for determining subject eligibility, the dosing plan, the parameters to be used in monitoring safety, the procedure for timely reporting of adverse events, and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB at each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution. Information about certain clinical trials and clinical trial results must be submitted within specific timeframes to the National Institutes of Health for public dissemination on the Clinicaltrials.gov registry. Failure to timely register a covered clinical study or to submit study results as provided for in the law can give rise to civil monetary penalties and also prevent the non-compliant party from receiving future grant funds from the federal government. The government has recently begun enforcing these registration and results reporting requirements against non-compliant clinical trial sponsors. Human clinical trials are typically conducted in at least three sequential phases and occasionally four or more, which may require repetition, or overlap or be combined: Phase I : The drug candidate is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness. During Phase I clinical trials, sufficient information about the investigational drug’s pharmacokinetics and pharmacological effects may be obtained to permit the design of well-controlled and scientifically valid Phase II clinical trials. 16 Phase II : The drug candidate is administered to a larger, but still limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted indications and to determine dosage tolerance and optimal dosage. Phase II clinical trials are typically well-controlled and closely monitored. Phase III : The drug candidate is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product. Phase III clinical trials usually involve a larger number of participants than a Phase II clinical trial. There is no guarantee that a clinical asset will successfully complete any such clinical trials. There is no assurance that any clinical trials on the assets owned or licensed by Conduit will be successful. Interactions with FDA During the Clinical Development Program Following the clearance of an IND and the commencement of clinical trials, the sponsor of such trial will continue to have interactions with the FDA. Progress reports detailing the results of clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. In addition, IND safety reports must be submitted to the FDA for any of the following: serious and unexpected suspected adverse reactions; findings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the product; and any clinically important increase in the occurrence of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. In addition, sponsors are given opportunities to meet with the FDA at certain points in the clinical development program. Specifically, sponsors may meet with the FDA prior to the submission of an IND (“pre-IND meeting”), at the end of Phase II clinical trial (“EOP2” meeting) and before an NDA is submitted (“pre-NDA meeting”). Meetings at other times may also be requested. These meetings provide an opportunity for the sponsor to share information about the data gathered to date with the FDA and for the FDA to provide advice on the next phase of development. For example, at an EOP2, a sponsor may discuss its Phase II clinical results and present its plans for the pivotal Phase III clinical trial(s) that it believes will support the approval of the new product. Such meetings may be conducted in person, via teleconference/videoconference or written response only with minutes reflecting the questions that the sponsor posed to the FDA and the agency’s responses. The FDA has indicated that its responses, as conveyed in meeting minutes and advice letters, only constitute recommendations and/or advice made to a sponsor and, as such, sponsors are not bound by such recommendations and/or advice. Nonetheless, from a practical perspective, a sponsor’s failure to follow the FDA’s recommendations for design of a clinical program may put the program at significant risk of failure. Acceptance of NDAs Assuming successful completion of the required clinical testing, the results of the preclinical studies and clinical trials, along with information relating to the product’s chemistry, manufacturing, controls, safety updates, patent information, abuse information and proposed labeling, are submitted to the FDA as part of an application requesting approval to market the clinical asset for one or more indications. Data may come from company-sponsored clinical trials intended to test the safety and efficacy of a product’s use or from a number of alternative sources, including studies initiated by investigators. To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of a drug product. The fee required for the submission and review of an application under the Prescription Drug User Fee Act (“PDUFA”) is substantial, and the sponsor of an approved application is also subject to an annual program fee assessed based on eligible prescription drug products. These fees are typically adjusted annually, and exemptions and waivers may be available under certain circumstances, such as where a waiver is necessary to protect the public health, where the fee would present a significant barrier to innovation, or where the applicant is a small business submitting its first human therapeutic application for review. 17 The FDA conducts a preliminary review of all applications within 60 days of receipt and must inform the sponsor at that time or before whether an application is sufficiently complete to permit substantive review. In pertinent part, the FDA’s regulations provide that the agency may refuse to file an application if the application does not include all pertinent information and data necessary for review by the FDA. In the event that the FDA determines that an application does not satisfy this standard, it will issue a Refuse to File (“RTF”) determination to the applicant. Typically, an RTF will be based on administrative incompleteness, such as clear omission of information or sections of required information; scientific incompleteness, such as omission of critical data, information or analyses needed to evaluate safety and efficacy or provide adequate directions for use; or inadequate content, presentation, or organization of information such that substantive and meaningful review is precluded. The FDA may request additional information rather than accept an application for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Review of NDAs After the submission is accepted for filing, the FDA begins an in-depth substantive review of the application. The FDA reviews the application to determine, among other things, whether the proposed product is safe and effective for its intended use, whether it has an acceptable purity profile and whether the product is being manufactured in accordance with cGMP. Under the goals and policies agreed to by the FDA under PDUFA, the FDA has 10 months from the filing date in which to complete its initial review of a standard application that is a new molecular entity, and six months from the filing date for an application with “priority review.” The review process may be extended by the FDA for three additional months to consider new information or in the case of a clarification provided by the applicant to address an outstanding deficiency identified by the FDA following the original submission. Despite these review goals, the NDA review process can be very lengthy, and it is not uncommon for FDA review of an application to extend beyond the PDUFA target action date. Most innovative drug products (other than biological products) obtain FDA marketing approval pursuant to an NDA submitted under Section 505(b)(1) of the FDCA, commonly referred to as a traditional or “full NDA.” In 1984, with passage of the Drug Price Competition and Patent Term Restoration Act, informally known as the Hatch-Waxman Act, that established an abbreviated regulatory scheme authorizing the FDA to approve generic drugs based on an innovator or “reference” product, Congress also enacted Section 505(b)(2) of the FDCA, which provides a hybrid pathway combining features of a traditional NDA and a generic drug application. Section 505(b)(2) enables the applicant to rely, in part, on the FDA’s prior findings of safety and efficacy data for an existing product, or published literature, in support of its application. Section 505(b)(2) NDAs may provide an alternate path to FDA approval for new or improved formulations or new uses of previously approved products that would require new clinical data to demonstrate safety or effectiveness. Section 505(b)(2) permits the filing of an NDA in which the applicant relies, at least in part, on information from studies made to show whether a drug is safe or effective that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use. A Section 505(b)(2) applicant may eliminate or reduce the need to conduct certain preclinical or clinical studies, if it can establish that reliance on studies conducted for a previously approved product is scientifically appropriate. The FDA may also require companies to perform additional studies or measurements, including nonclinical and clinical studies, to support the change from the approved product. The FDA may then approve the new clinical asset for all or some of the labeled indications for which the referenced product has been approved, as well as for any new indication for which the Section 505(b)(2) NDA applicant has submitted data. In connection with its review of an application, the FDA will typically submit information requests to the applicant and set deadlines for responses thereto. The FDA will also conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether the manufacturing processes and facilities comply with cGMPs. The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and are adequate to assure consistent production of the product within required specifications. 18 The FDA also may inspect the sponsor and one or more clinical trial sites to assure compliance with IND and GCP requirements and the integrity of the clinical data submitted to the FDA. To ensure cGMP and GCP compliance by its employees and third-party contractors, an applicant may incur significant expenditure of time, money and effort in the areas of training, record keeping, production and quality control. The FDA generally accepts data from foreign clinical trials in support of an NDA if the trials were conducted under an IND. If a foreign clinical trial is not conducted under an IND, the FDA nevertheless may accept the data in support of an NDA if the study was conducted in accordance with GCPs and the FDA is able to validate the data through an on-site inspection, if deemed necessary. Although the FDA generally requests that marketing applications be supported by some data from domestic clinical trials, the FDA may accept foreign data as the sole basis for marketing approval if (1) the foreign data are applicable to the United States population and United States medical practice, (2) the studies were performed by clinical investigators with recognized competence, and (3) the data may be considered valid without the need for an on-site inspection or, if the FDA considers the inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means. The FDA may also refer an application, including applications for novel clinical asset which present difficult questions of safety or efficacy, to an advisory committee for review, evaluation and recommendation as to whether the application should be approved and under what conditions. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendation of an advisory committee, but it considers such recommendations when making final decisions on approval. Data from clinical trials are not always conclusive, and the FDA or its advisory committee may interpret data differently than the sponsor interprets the same data. The FDA may also re-analyze the clinical trial data, which could result in extensive discussions between the FDA and the applicant during the review process or delay, limit or prevent regulatory approval. The FDA may not grant approval on a timely basis or at all. The FDA also may require submission of a risk evaluation and mitigation strategy (“REMS”) if it determines that a REMS is necessary to ensure that the benefits of the drug product outweigh its risks and to assure the safe use of the product. The REMS could include medication guides, physician communication plans, assessment plans and/or elements to assure safe use, such as restricted distribution methods, patient registries or other risk minimization tools. The FDA determines the requirement for a REMS, as well as the specific REMS provisions, on a case-by-case basis. If the FDA concludes a REMS is needed, the sponsor of the application must submit a proposed REMS and the FDA will not approve the application without a REMS. Decisions on NDAs The FDA reviews an application to determine, among other things, whether the product is safe and whether it is effective for its intended use(s), with the latter determination being made on the basis of substantial evidence. The term “substantial evidence” is defined under the FDCA as “evidence consisting of adequate and well-controlled investigations, including clinical investigations, by experts qualified by scientific training and experience to evaluate the effectiveness of the drug involved, on the basis of which it could fairly and responsibly be concluded by such experts that the drug will have the effect it purports or is represented to have under the conditions of use prescribed, recommended, or suggested in the labeling or proposed labeling thereof.” The FDA has interpreted this evidentiary standard to require at least two adequate and well-controlled clinical investigations to establish effectiveness of a new product. Under certain circumstances, however, the FDA has indicated that a single trial with certain characteristics and additional information may satisfy this standard. This approach was subsequently endorsed by Congress in 1998 with legislation providing, in pertinent part, that “If [the FDA] determines, based on relevant science, that data from one adequate and well-controlled clinical investigation and confirmatory evidence (obtained prior to or after such investigation) are sufficient to establish effectiveness, the FDA may consider such data and evidence to constitute substantial evidence.” This modification to the law recognized the potential for the FDA to find that one adequate and well controlled clinical investigation with confirmatory evidence, including supportive data outside of a controlled trial, is sufficient to establish effectiveness. In December 2019, the FDA issued draft guidance further explaining the studies that are needed to establish substantial evidence of effectiveness, and in September 2023 it issued a draft guidance that complements the 2019 draft guidance. The FDA has not yet finalized either guidance. 19 After evaluating the application and all related information, including the advisory committee recommendations, if any, and inspection reports of manufacturing facilities and clinical trial sites, the FDA will issue either a Complete Response Letter (“CRL”) or an approval letter. To approve the application, the FDA must determine that the drug is effective and that its expected benefits outweigh its potential risks to patients. This “benefit-risk” assessment is informed by the extensive body of evidence about the product’s safety and efficacy in the NDA. This assessment is also informed by other factors, including: the severity of the underlying condition and how well patients’ medical needs are addressed by currently available therapies; uncertainty about how the premarket clinical trial evidence will extrapolate to real-world use of the product in the post-market setting; and whether risk management tools are necessary to manage specific risks. In connection with this assessment, the FDA review team will assemble all individual reviews and other documents into an “action package,” which becomes the record for FDA review. The review team then issues a recommendation, and a senior FDA official makes a decision. A CRL indicates that the review cycle of the application is complete, and the application will not be approved in its present form. A CRL generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. The CRL may require additional clinical or other data, additional pivotal Phase III clinical trial(s) and/or other significant and time-consuming requirements related to clinical trials, preclinical studies or manufacturing. If a CRL is issued, the applicant will have one year to respond to the deficiencies identified by the FDA, at which time the FDA can deem the application withdrawn or, in its discretion, grant the applicant an additional six-month extension to respond. The FDA has committed to reviewing resubmissions in response to an issued CRL in either two or six months depending on the type of information included. Even with the submission of this additional information, however, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. An approval letter, on the other hand, authorizes commercial marketing of the product with specific prescribing information for specific indications. That is, the approval will be limited to the conditions of use ( e.g. , patient population, indication) described in the FDA-approved labeling. Further, depending on the specific risk(s) to be addressed, the FDA may require that contraindications, warnings or precautions be included in the product labeling, require that post-approval trials, including Phase 4 clinical trials, be conducted to further assess a product’s safety after approval, require testing and surveillance programs to monitor the product after commercialization or impose other conditions, including distribution and use restrictions or other risk management mechanisms under a REMS which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-marketing trials or surveillance programs. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval. Special FDA Expedited Review Programs The FDA is authorized to designate certain products for expedited development or review if they are intended to address an unmet medical need in the treatment of a serious or life-threatening disease or condition. These programs include fast track designation, breakthrough therapy designation, and priority review designation. The purpose of these programs is to provide important new drugs to patients earlier than under standard FDA review procedures. To be eligible for a fast-track designation, the FDA must determine, based on the request of a sponsor, that a product is intended to treat a serious or life-threatening disease or condition and demonstrates the potential to address an unmet medical need. The FDA will determine that a product will fill an unmet medical need if it will provide a therapy where none exists or provide a therapy that may be potentially superior to existing therapy based on efficacy or safety factors. Fast track designation provides additional opportunities for interaction with the FDA’s review team and may allow for a rolling review of NDA components before the completed application is submitted, if the sponsor provides a schedule for the submission of the sections of the NDA, the FDA agrees to accept sections of the NDA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA. In addition, fast track designation may be withdrawn by the sponsor or rescinded by the FDA if the designation is no longer supported by data emerging in the clinical trial process. 20 In addition, with the enactment of the FDA Safety and Innovation Act (“FDASIA”) in 2012, Congress created a new regulatory program for therapeutic candidates designated by FDA as “breakthrough therapies” upon a request made by the IND sponsors. A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The FDA must take certain actions with respect to breakthrough therapies, such as holding timely meetings with and providing advice to the product sponsor, intended to expedite the development and review of an application for approval of a breakthrough therapy. Finally, the FDA may designate a product for priority review if it is a drug that treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness. The FDA determines at the time that the marketing application is submitted, on a case-by-case basis, whether the proposed drug represents a significant improvement in treatment, prevention or diagnosis of disease when compared with other available therapies. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting drug reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, or evidence of safety and effectiveness in a new subpopulation. A priority review designation is intended to direct overall attention and resources to the evaluation of such applications, and to shorten the FDA’s goal for taking action on a marketing application from ten months to six months for an NDA for a new molecular entity from the date of filing. Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be shortened. Furthermore, fast track designation, breakthrough therapy designation and priority review do not change the standards for approval and may not ultimately expedite the development or approval process. Accelerated Approval Pathway In addition, a product studied for its safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval, meaning that it may be approved on (i) the basis of adequate and well-controlled clinical trials establishing that the drug product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or (ii) on an intermediate clinical endpoint that can be measured earlier than irreversible morbidity or mortality (“IMM”) and that is reasonably likely to predict an effect on IMM or other clinical benefits, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require a sponsor of a drug receiving accelerated approval to perform post-marketing studies to verify and describe the predicted effect on IMM or other clinical endpoints, and the drug may be subject to expedited withdrawal procedures. Drugs granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditional approval. The accelerated approval pathway is usually contingent on a sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the drug’s clinical benefit. As a result, a therapeutic candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or to confirm the predicted clinical benefit of the product during post-marketing studies, would allow the FDA to withdraw approval of the drug. All promotional materials for drug products being considered and approved under the accelerated approval program are subject to prior review by the FDA. Lawmakers, FDA officials, and other stakeholders have recently been evaluating the accelerated approval program and have proposed potential reforms to improve certain aspects. Scrutiny of the accelerated approval pathway is likely to continue and may lead to legislative and/or administrative changes in the future. Post-Approval Requirements Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. Certain modifications to the product, including changes in indications or manufacturing processes or facilities, may require the applicant to develop additional data or conduct additional preclinical studies and clinical trials to support the submission to FDA. As previously noted, there also are continuing, annual user fee requirements for any marketed products, as well as new application fees for supplemental applications with clinical data. 21 The FDA may impose a number of post-approval requirements as a condition of approval of an NDA. For example, the FDA may require post-marketing testing, including Phase 4 clinical trials, and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization. In addition, FDA regulations require that products be manufactured in specific approved facilities and in accordance with cGMPs. The cGMP regulations include requirements relating to the organization of personnel, buildings and facilities, equipment, control of components and drug product containers and closures, production and process controls, packaging and labeling controls, holding and distribution, laboratory controls, records and reports and returned or salvaged products. Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and some state agencies and are subject to periodic unannounced inspections by the FDA for compliance with cGMP requirements and other laws. Changes to the manufacturing process are strictly regulated and, depending on the significance of the change, may require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers. Accordingly, manufacturers must continue to expend time, money, and effort in production and quality control to maintain compliance with cGMP and other aspects of quality control and quality assurance. The FDA strictly regulates the marketing, labeling, advertising and promotion of drug products that are placed on the market. A product cannot be commercially promoted before it is approved, and approved drugs may generally be promoted only for their approved indications and for use in patient populations described in the product’s approved labeling. Promotional claims must also be consistent with the product’s FDA-approved label, including claims related to safety and effectiveness. The government closely scrutinizes the promotion of prescription drugs in specific contexts such as direct-to-consumer advertising, industry-sponsored scientific and educational activities, and promotional activities involving the Internet and social media. Although physicians may prescribe legally available products for off-label uses, manufacturers may not market or promote such uses. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in mandatory revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences of regulatory non-compliance include, among other things: ● restrictions on, or suspensions of, the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls; ● interruption of production processes, including the shutdown of manufacturing facilities or production lines or the imposition of new manufacturing requirements; ● fines, warning letters or other enforcement letters or clinical holds on post-approval clinical trials; ● mandated modification of promotional materials and labeling and the issuance of corrective information; ● refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product approvals; ● product seizure or detention, or refusal to permit the import or export of products; ● injunctions or the imposition of civil or criminal penalties; or ● consent decrees, corporate integrity agreements, debarment, or exclusion from federal healthcare programs. 22 In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act (“PDMA”) which regulates the distribution of drugs and drug samples at the federal level and sets minimum standards for the registration and regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose requirements to ensure accountability in distribution. More recently, the Drug Supply Chain Security Act (the “DSCSA”), was enacted with the aim of building an electronic system to identify and trace certain prescription drugs distributed in the United States. The DSCSA mandates phased-in and resource-intensive obligations for pharmaceutical manufacturers, wholesale distributors, and dispensers over a 10-year period that were expected to culminate in November 2023. From time to time, new legislation and regulations may be implemented that could significantly change the statutory provisions governing the approval, manufacturing and marketing of products regulated by the FDA. For example, the FDA released proposed regulations in February 2022 to amend the national standards for licensing of wholesale drug distributors by the states; establish new minimum standards for state licensing third-party logistics providers; and create a federal system for licensure for use in the absence of a state program, each of which is mandated by the DSCSA. It is impossible to predict whether further legislative or regulatory changes will be enacted, or FDA regulations, guidance or interpretations will be changed or what the impact of such potential changes, if any, may be. Regulatory Exclusivity and Approval of Follow-on Products Hatch-Waxman Exclusivity In addition to enacting Section 505(b)(2) of the FDCA as part of the Hatch-Waxman Amendments to the FDCA, Congress also established an abbreviated regulatory scheme authorizing the FDA to approve generic drugs that are shown to contain the same active ingredients as, and to be bioequivalent to, drugs previously approved by the FDA pursuant to NDAs. To obtain approval of a generic drug, an applicant must submit an abbreviated new drug application (“ANDA”) to the agency. An ANDA is a comprehensive submission that contains, among other things, data and information pertaining to the active pharmaceutical ingredient, bioequivalence, drug product formulation, specifications and stability of the generic drug, as well as analytical methods, manufacturing process validation data and quality control procedures. ANDAs are “abbreviated” because they cannot include preclinical and clinical data to demonstrate safety and effectiveness. Instead, in support of such applications, a generic manufacturer must rely on the preclinical and clinical testing previously conducted for a drug product previously approved under an NDA, known as the reference listed drug (“RLD”). In order for an ANDA to be approved, the FDA must find that the generic version is identical to the RLD with respect to the active ingredients, the route of administration, the dosage form, the strength of the drug and the conditions of use of the drug. At the same time, the FDA must also determine that the generic drug is “bioequivalent” to the innovator drug. Under the statute, a generic drug is bioequivalent to an RLD if “the rate and extent of absorption of the drug do not show a significant difference from the rate and extent of absorption of the listed drug.” Unlike the 505(b)(2) NDA pathway that permits a follow-on applicant to conduct and submit data from additional clinical trials or nonclinical studies in order to support the proposed change(s) to the reference product, the ANDA regulatory pathway does not allow applicants to submit new clinical data other than bioavailability or bioequivalence data. Upon approval of an ANDA, the FDA indicates whether the generic product is “therapeutically equivalent” to the RLD in its publication “Approved Drug Products with Therapeutic Equivalence Evaluations,” also referred to as the “Orange Book.” Physicians and pharmacists consider a therapeutic equivalent generic drug to be fully substitutable for the RLD. In addition, by operation of certain state laws and numerous health insurance programs, the FDA’s designation of therapeutic equivalence often results in substitution of the generic drug without the knowledge or consent of either the prescribing physician or patient. As part of the NDA review and approval process, applicants are required to list with the FDA each patent that has claims that cover the applicant’s product or method of therapeutic use. Upon approval of a new drug, each of the patents listed in the application for the drug is then published in the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential follow-on competitors in support of approval of an ANDA or 505(b)(2) NDA. 23 When an ANDA applicant submits its application to the FDA, it is required to certify to the FDA concerning any patents listed for the reference product in the FDA’s Orange Book. Specifically, the applicant must certify that: (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the new product. Moreover, to the extent that the Section 505(b)(2) NDA applicant is relying on studies conducted for an already approved product, the applicant also is required to certify to the FDA concerning any patents listed for the NDA-approved product in the Orange Book to the same extent that an ANDA applicant would. If the follow-on applicant does not challenge the innovator’s listed patents, the FDA will not approve the ANDA or 505(b)(2) application until all the listed patents claiming the referenced product have expired. A certification that the new product will not infringe the already approved product’s listed patents, or that such patents are invalid, is called a Paragraph IV certification. If the follow-on applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA or 505(b)(2) NDA until the earlier of 30 months, expiration of the patent, settlement of the lawsuit, or a decision in the infringement case that is favorable to the ANDA or 505(b)(2) applicant. An ANDA or 505(b)(2) application also will not be approved until any applicable non-patent exclusivities listed in the Orange Book for the referenced product have expired. The Hatch-Waxman Amendments to the FDCA provided a five-year period of non-patent data exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity (“NCE”). For the purposes of this provision, an NCE is a drug that contains no active moiety that has previously been approved by the FDA in any other NDA. An active moiety is the molecule or ion responsible for the physiological or pharmacological action of the drug substance. In cases where such NCE exclusivity has been granted, an ANDA or 505(b)(2) NDA may not be filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification, in which case the applicant may submit its application four years following the original product approval. The FDCA also provides for a period of three years of data exclusivity if an NDA or NDA supplement includes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application. This three-year exclusivity period often protects changes to a previously approved drug product, such as new indications, dosage forms, route of administration or combination of ingredients. Three-year exclusivity would be available for a drug product that contains a previously approved active moiety, provided the statutory requirement for a new clinical investigation is satisfied. Unlike five-year NCE exclusivity, an award of three-year exclusivity does not block the FDA from accepting ANDAs or 505(b)(2) NDAs seeking approval for generic versions of the drug as of the date of approval of the original drug product; rather, this three-year exclusivity covers only the conditions of use associated with the new clinical investigations and, as a general matter, does not prohibit the FDA from approving follow-on applications for drugs containing the original active ingredient. Five-year and three-year exclusivity also will not delay the submission or approval of a traditional NDA filed under Section 505(b)(1) of the FDCA; however, an applicant submitting a traditional NDA would be required to conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness. Orphan Drug Designation and Exclusivity Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition, which is generally a disease or condition that affects either (i) fewer than 200,000 individuals in the United States, or (ii) more than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making available in the United States a drug for this type of disease or condition will be recovered from sales in the United States for that drug. Legislative proposals are currently being considered that would revise or revoke the second option available for a drug candidate to receive an orphan designation, the so-called “cost recovery” pathway. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use will be disclosed publicly by the FDA; the posting will also indicate whether a drug is no longer designated as an orphan drug. 24 More than one clinical asset may receive an orphan drug designation for the same indication, and the same clinical asset can be designated for more than one qualified orphan indication. The benefits of orphan drug designation include research and development tax credits and exemption from FDA prescription drug user fees. Orphan drug designation does not convey any advantage in or shorten the duration of the regulatory review and approval process if or when an NDA for the drug candidate is filed. If a product that has orphan drug designation subsequently receives the first FDA approval for the indication for which it has such designation, the product is entitled to orphan product exclusivity, which means that for seven years, the FDA may not approve any other marketing applications for the same drug for the same indication, except under limited circumstances described further below. Orphan exclusivity does not block the approval of a different drug for the same rare disease or condition, nor does it block the approval of the same drug for different conditions. As a result, the FDA can still approve different drugs for use in treating the same indication or disease. Additionally, if a drug designated as an orphan product receives marketing approval for an indication broader than what was designated, it may not be entitled to orphan drug exclusivity. Orphan exclusivity will not bar approval of another product with the same drug for the same condition under certain circumstances, including if a subsequent product with the same drug for the same condition is shown to be clinically superior to the approved product on the basis of greater efficacy or safety or a major contribution to patient care, or if the company with orphan drug exclusivity cannot assure the availability of sufficient quantities of the drug to meet the needs of persons with the disease or condition for which the drug was designated. The FDA is now required to publish a summary of the clinical superiority findings when a drug is eligible for orphan product exclusivity on the basis of a demonstration of clinical superiority. 25 Patent Term Extension A patent claiming a prescription drug for which FDA approval is granted may be eligible for a limited patent term extension under the FDCA, which permits a patent restoration of up to five years for patent term lost during product development and the FDA regulatory review provided that certain statutory and regulatory requirements are met. The length of the patent term extension is related to the length of time the drug is under regulatory review while the patent is in force. The restoration period granted on a patent covering a new FDA-regulated medical product is typically one-half the time between the date a clinical investigation on human beings is begun and the submission date of an application for premarket approval of the product, plus the time between the submission date of an application for approval of the product and the ultimate approval date. Patent term restoration cannot be used to extend the remaining term of a patent past a total of 14 years from the product’s approval date. Only one patent applicable to an approved drug product is eligible for the extension, and the application for the extension must be submitted prior to the expiration of the patent in question. A patent that covers multiple products for which approval is sought can only be extended in connection with one of the marketing approvals. The USPTO reviews and approves the application for any patent term extension or restoration in consultation with the FDA. Other U.S. Healthcare Laws and Regulations Manufacturing, sales, promotion, and other activities following product approval may also be subject to regulation by other regulatory authorities in the United States in addition to the FDA. Depending on the nature of the product, those authorities may include the Centers for Medicare and Medicaid Services (“CMS”), other divisions of the Department of Health and Human Services (“HHS”), the Department of Justice, the Drug Enforcement Administration, the Federal Trade Commission, the Occupational Safety and Health Administration, and state and local governments. 26 For example, in the United States, sales and marketing for prescription biopharmaceutical products must comply with state and federal fraud and abuse laws. These laws include the federal Anti-Kickback Statute, which makes it illegal for any person, including a prescription drug manufacturer (or a party acting on its behalf), to knowingly and willfully solicit, receive, offer or pay any remuneration that is intended to induce or reward referrals, including the purchase, recommendation, order or prescription of a particular drug, for which payment may be made under a federal healthcare program, such as Medicare or Medicaid. Violations of this law are punishable by up to ten years in prison, criminal fines, administrative civil money penalties and exclusion from participation in federal healthcare programs. In addition, the Patient Protection and Affordable Care Act, or ACA, among other things, amended the intent requirement of the federal Anti-Kickback Statute and two of the five criminal healthcare fraud statutes created by the Health Insurance Portability and Accountability Act of 1996, or HIPAA. A person or entity no longer needs to have actual knowledge of these two provisions in the statute or specific intent to violate them; specifically with respect to the prohibition on executing or attempting to execute a scheme or artifice to defraud or to fraudulently obtain money or property of any healthcare benefit program and the prohibition on disposing of assets to enable a person to become eligible for Medicaid. Moreover, the government may now assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act. Pricing and rebate programs must comply with the Medicaid rebate requirements of the U.S. Omnibus Budget Reconciliation Act of 1990 and more recent requirements in the ACA. If products are made available to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply. There also are federal transparency requirements under the Physician Payments Sunshine Act that require manufacturers of FDA-approved drugs, devices, biologics and medical supplies covered by Medicare or Medicaid to report, on an annual basis, to CMS information related to payments and other transfers of value to physicians, teaching hospitals, and certain advanced non-physician healthcare practitioners and physician ownership and investment interests. Prescription drug products also must meet applicable child-resistant packaging requirements under the U.S. Poison Prevention Packaging Act. Manufacturing, sales, promotion, and other activities also are potentially subject to federal and state consumer protection and unfair competition laws. Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines, or the relevant compliance guidance promulgated by the federal government, in addition to requiring drug manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures to the extent that those laws impose requirements that are more stringent than the Physician Payments Sunshine Act. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. The failure to comply with any of these laws or regulatory requirements subjects firms to possible legal or regulatory action. Depending on the circumstances, failure to meet applicable regulatory requirements can result in criminal prosecution, fines or other penalties, injunctions, requests for recall, seizure of products, total or partial suspension of production, denial or withdrawal of product approvals or refusal to allow a firm to enter into supply contracts, including government contracts. Government Regulation Outside the U.S. In addition to regulations in the United States, we will be subject to a variety of foreign regulations that govern, among other things, clinical trials and any commercial sales and distribution of our products, if approved, either directly or through distribution partners. Whether or not we obtain FDA approval for a product candidate, we must obtain the requisite approvals from regulatory authorities in foreign countries or economic areas, such as the European Union and the United Kingdom, among other foreign countries, before we may commence clinical trials or market products in those countries or areas. The foreign regulatory approval process includes all of the risks associated with the FDA approval described above, and the time required to obtain approval in other countries and jurisdictions might differ from and be longer than that required to obtain FDA approval. Some foreign jurisdictions have a drug product approval process similar to that in the U.S., which requires the submission of a clinical trial application much like the IND prior to the commencement of clinical studies. In Europe, for example, a clinical trial application, or CTA, must be submitted to each country’s national health authority and an independent ethics committee, much like the FDA and IRB, respectively. Once the CTA is approved in accordance with a country’s requirements, clinical trial development may proceed. To obtain regulatory approval of a medicinal product candidate under European Union regulatory systems, we would be required to submit a Marketing Authorisation Application, or MAA, which is similar to the NDA, except that, among other things, there are country-specific document requirements. For countries outside of the European Union, such as countries in Eastern Europe, Latin America or Asia, and recently the United Kingdom, the requirements governing the conduct of clinical trials, product approval, pricing and reimbursement vary from country to country. Regulatory approval in one country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatory process in others. Moreover, some nations may not accept clinical studies performed for U.S. approval to support approval in their countries or require that additional studies be performed on natives of their countries. In addition, in certain foreign markets, the pricing of drug products is subject to government control and reimbursement may in some cases be unavailable or insufficient. If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions, and criminal prosecution. 27 As of January 31, 2020, the United Kingdom is no longer a member state of the European Union, and therefore a separate marketing authorization application and approval will be required to market a medicinal product in the U.K. The Medicines and Healthcare products Regulatory Agency, or the MHRA, is the U.K.’s standalone pharmaceutical regulator. Clinical Trials and Regulation of Medicinal Products in Europe As in the United States, medicinal products can be marketed in the European Union only if a marketing authorization from the competent regulatory agencies has been obtained. Similar to the United States, the various phases of preclinical and clinical research in the European Union are subject to significant regulatory controls. Pursuant to the European Clinical Trials Directive, a system for the approval of clinical trials in the European Union has been implemented through national legislation of the member states. Under this system, an applicant must obtain approval from the competent national authority of a European Union member state in which the clinical trial is to be conducted. Furthermore, the applicant may only start a clinical trial after a competent ethics committee has issued a favorable opinion. Clinical trial applications must be accompanied by an investigational medicinal product dossier with supporting information prescribed by the European Clinical Trials Directive and corresponding national laws of the member states and further detailed in applicable guidance documents. In April 2014, the new Clinical Trials Regulation, (EU) No 536/2014 (Clinical Trials Regulation) was adopted and became effective on January 31, 2022. The Clinical Trials Regulation is directly applicable in all the European Union Member States, repealing the prior Clinical Trials Directive 2001/20/EC. The extent to which ongoing clinical trials will be governed by the Clinical Trials Regulation will depend on the duration of the individual clinical trial; if a clinical trial continues for more than three years from the day on which the Clinical Trials Regulation becomes applicable the Clinical Trials Regulation will at that time begin to apply to the clinical trial. The new Clinical Trials Regulation aims to simplify and streamline the approval of clinical trials in the European Union. The main characteristics of the regulation include: a streamlined application procedure via a single entry point; a single set of documents to be prepared and submitted for the application as well as simplified reporting procedures for clinical trial sponsors; and a harmonized procedure for the assessment of applications for clinical trials. To obtain marketing approval of a drug in the European Union, an applicant must submit a MAA either under a centralized or decentralized procedure. The centralized procedure provides for the grant of a single marketing authorization by the European Commission that is valid for all European Union member states, Iceland, Lichtenstein and Norway. The centralized procedure is compulsory for specific products, including for medicines produced by certain biotechnological processes, products designated as orphan medicinal products, advanced therapy products (such as gene-therapy, somatic cell-therapy or tissue-engineered medicines) and products with a new active substance indicated for the treatment of certain diseases. For products with a new active substance indicated for the treatment of certain diseases and products that are highly innovative or for which a centralized process is in the interest of patients, the centralized procedure may be optional. Under the centralized procedure the maximum timeframe for the evaluation of an MAA by the European Medicines Agency (“EMA”) is 210 days, excluding clock stops, when additional written or oral information is to be provided by the applicant in response to questions asked by the Committee for Medicinal Products for Human Use (“CHMP”). Accelerated assessment might be granted by the CHMP in exceptional cases, when a medicinal product is expected to be of a major public health interest, particularly from the point of view of therapeutic innovation. The timeframe for the evaluation of an MAA under the accelerated assessment procedure is of 150 days, excluding stop-clocks. 28 The decentralized procedure is available to applicants who wish to market a product in specific European Union member states where such product has not received marketing approval in any European Union member states before. The decentralized procedure provides for an applicant to apply to one-member state to assess the application (the reference member state) and specifically list other member states in which it wishes to obtain approval (concerned member states). In the European Union, only products for which marketing authorizations have been granted may be promoted. A marketing authorization is valid for five years in principle and the marketing authorization may be renewed after five years on the basis of a re-evaluation of the risk-benefit balance by the EMA or by the competent authority of the authorizing member state. To this end, the marketing authorization holder must provide the EMA or the competent authority with a consolidated version of the file in respect of quality, safety and efficacy, including all variations introduced since the marketing authorization was granted, at least six months before the marketing authorization ceases to be valid. Once renewed, the marketing authorization is valid for an unlimited period, unless the European Commission or the competent authority decides, on justified grounds relating to pharmacovigilance, to proceed with one additional five-year renewal. Any authorization which is not followed by the actual placing of the drug on the European Union market (in case of centralized procedure) or on the market of the authorizing member state within three years after authorization ceases to be valid (the so-called sunset clause). Moreover, even if authorized to be marketed in the European Union, prescription medicines may only be promoted to healthcare professionals, not the general public. All promotion should be in accordance with the particulars listed in the summary of product characteristics. Promotional materials must also comply with various laws, and codes of conduct developed by pharmaceutical industry bodies in the European Union which govern (among other things) the training of sales staff, promotional claims and their justification, comparative advertising, misleading advertising, endorsements, and (where permitted) advertising to the general public. Failure to comply with these requirements could lead to the imposition of penalties by the competent authorities of the European Union member states. The penalties could include warnings, orders to discontinue the promotion of the drug product, seizure of promotional materials, fines and possible imprisonment. Regulation of New Drugs in the United Kingdom The United Kingdom left the European Union on January 31, 2020 (commonly referred to as “Brexit”), with a transitional period that expired on December 31, 2020. The United Kingdom and the European Union entered into a trade agreement known as the Trade and Cooperation Agreement, which went into effect on January 1, 2021. It remains to be seen how, if at all, Brexit and the Trade and Cooperation Agreement will impact regulatory requirements for product candidates and products in the United Kingdom. We are currently evaluating the potential impacts on our business of the Trade and Cooperation Agreement and guidance issued to date by the United Kingdom’s MHRA regarding the requirements for licensing and marketing medicinal products in the United Kingdom. Since the regulatory framework for pharmaceutical products in the United Kingdom covering the quality, safety and efficacy of pharmaceutical products, clinical trials, marketing authorization, commercial sales and distribution of medicinal products is derived from EU Directives and Regulations, Brexit could materially impact the future regulatory regime which applies to such products and the approval of product candidates in the United Kingdom. Such outcomes could make it more difficult and expensive for us to do business in Europe, complicate our clinical, manufacturing and regulatory strategies and impair our ability to obtain and maintain regulatory approval for, and, if approved, commercialize, our products and product candidates in Europe. 29 Pharmaceutical Coverage, Pricing and Reimbursement, and Healthcare Reform Sales of our products, if approved for marketing, will depend, in part, on the availability and extent of coverage and reimbursement by third-party payors, such as government health programs, including Medicare and Medicaid, commercial insurance and managed healthcare organizations. These third-party payors are increasingly challenging the price and limiting the coverage and reimbursement amounts for medical products and services. There may be significant delays in obtaining coverage and reimbursement for approved products, and coverage may be more limited than the purposes for which the product is approved by the FDA or regulatory authorities in other countries. It is time-consuming and expensive to seek reimbursement from third-party payors. Moreover, eligibility for reimbursement does not imply that any product will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim payments for new products, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Payment rates may vary according to the use of the product and the clinical setting in which it is used, may be based on payments allowed for lower-cost products that are already reimbursed and may be incorporated into existing payments for other services. Net prices for products may be reduced by mandatory discounts or rebates required by third-party payors and by any future relaxation of laws that presently restrict imports of products from countries where they may be sold at lower prices than in the United States. In the United States, third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursement policies, but they also have their own methods and approval process apart from Medicare coverage and reimbursement determinations. Accordingly, one third-party payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage for the product. In addition, the containment of healthcare costs has become a priority for federal and state governments, and the prices of drugs have been a focus in this effort. The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement, and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue and results. Decreases in third-party reimbursement for our clinical assets or a decision by a third-party payor to not cover our clinical assets could reduce physician usage of the clinical asset and have a material adverse effect on our sales, results of operations and financial condition. Moreover, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several 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 drug products. Individual states in the United States have also increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In December 2020, the U.S. Supreme Court held unanimously that federal law does not preempt the states’ ability to regulate pharmaceutical benefit managers (“PBMs”) and other members of the healthcare and pharmaceutical supply chain, an important decision that has led to further and more aggressive efforts by states in this area. Most recently, on August 16, 2022, President Biden signed into the law the Inflation Reduction Act of 2022, or the IRA. Among other things, the IRA has multiple provisions that may impact the prices of drug products that are both sold into the Medicare program and throughout the United States. Starting in 2023, a manufacturer of drugs covered by Medicare Parts B or D must pay a rebate to the federal government if their drug product’s price increases faster than the rate of inflation. This calculation is made on a drug product by drug product basis and the amount of the rebate owed to the federal government is directly dependent on the volume of a drug product that is paid for by Medicare Parts B or D. Additionally, starting for payment year 2026, CMS will negotiate drug prices annually for a select number of single source Part D drugs without generic or biosimilar competition. CMS will also negotiate drug prices for a select number of Part B drugs starting for payment year 2028. If a drug product is selected by CMS for negotiation, it is expected that the revenue generated from such drug will decrease. In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirements governing drug pricing vary widely from country to country. For example, in the European Union, the sole legal instrument at the European Union level governing the pricing and reimbursement of medicinal products is Council Directive 89/105/EEC (the “Price Transparency Directive”). The aim of the Price Transparency Directive is to ensure that pricing and reimbursement mechanisms established in the European Union Member States are transparent and objective, do not hinder the free movement of and trade in medicinal products in the European Union, and do not hinder, prevent or distort competition on the market. The Price Transparency Directive does not provide any guidance concerning the specific criteria on the basis of which pricing and reimbursement decisions are to be made in the individual European Union Member States, nor does it have any direct consequence for pricing or reimbursement levels in the individual European Union Member States. The European Union Member States are free to restrict the range of medicinal products for which their national health insurance systems provide reimbursement, and to control the prices and/or reimbursement levels of medicinal products for human use. A European Union Member State may approve a specific price or level of reimbursement for the medicinal product, or alternatively adopt a system of direct or indirect controls on the profitability of the company responsible for placing the medicinal product on the market, including volume-based arrangements, caps and reference pricing mechanisms. 30 Health Technology Assessment (“HTA”) of medicinal products is becoming an increasingly common part of the pricing and reimbursement procedures in some European Union Member States, including France, Germany, Ireland, Italy and Sweden. The HTA process in the European Union Member States is governed by the national laws of these countries. HTA is the procedure according to which the assessment of the public health impact, therapeutic impact, and the economic and societal impact of the use of a given medicinal product in the national healthcare systems of the individual country is conducted. HTA generally focuses on the clinical efficacy and effectiveness, safety, cost, and cost-effectiveness of individual medicinal products as well as their potential implications for the healthcare system. Those elements of medicinal products are compared with other treatment options available on the market. The outcome of HTA regarding specific medicinal products will often influence the pricing and reimbursement status granted to these medicinal products by the competent authorities of individual European Union Member States. The extent to which pricing and reimbursement decisions are influenced by the HTA of the specific medicinal product vary between the European Union Member States. For example, European Union Member States that have not yet developed HTA mechanisms could rely to some extent on the HTA performed in countries with a developed HTA framework when adopting decisions concerning the pricing and reimbursement of a specific medicinal product. Separately from cost containment efforts, in the United States and some foreign jurisdictions, there also have been, and continue to be, several legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of product candidates or restrict or regulate post-approval activities. The FDA’s and other regulatory authorities’ policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our current or future product candidates. Data Privacy and the Protection of Personal Information We are subject to laws and regulations governing data privacy and the protection of personal information including health information. The legislative and regulatory landscape for privacy and data protection continues to evolve, and there has been an increasing focus on privacy and data protection issues which will continue to affect our business. In the United States, we may be subject to state security breach notification laws, state laws protecting the privacy of health and personal information and federal and state consumer protections laws that regulate the collection, use, disclosure and transmission of personal information. These laws overlap and often conflict and each of these laws is subject to varying interpretations by courts and government agencies, creating complex compliance issues. If we fail to comply with applicable laws and regulations we could be subject to penalties or sanctions, including criminal penalties. Our customers and research partners must comply with laws governing the privacy and security of health information, including HIPAA and state health information privacy laws. If we knowingly obtain health information that is protected under HIPAA, called “protected health information,” our customers or research collaborators may be subject to enforcement, and we may have direct liability for the unlawful receipt of protected health information or for aiding and abetting a HIPAA violation. State laws protecting health and personal information are becoming increasingly stringent. For example, California has implemented the California Confidentiality of Medical Information Act that imposes restrictive requirements regulating the use and disclosure of health information and other personally identifiable information, and California has recently adopted the California Consumer Privacy Act of 2018 (“CCPA”). The CCPA mirrors a number of the key provisions of the EU General Data Protection Regulation (“GDPR”) described below. The CCPA establishes a new privacy framework for covered businesses by creating an expanded definition of personal information, establishing new data privacy rights for consumers in the State of California, imposing special rules on the collection of consumer data from minors, and creating a new and potentially severe statutory damages framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches. Since passage of the CCPA, several other states (Connecticut, Colorado, Virginia, and Utah) have also enacted comprehensive consumer privacy laws that include key differences from California’s law, further complicating compliance by industry and other stakeholders. Other states in the U.S. are considering privacy laws similar to the CCPA. 31 In Europe, the GDPR went into effect in May 2018, implementing a broad data protection framework that expanded the scope of European Union data protection law, including to non- European Union entities that process, or control the processing of, personal data relating to individuals located in the European Union, including clinical trial data. The GDPR sets out a number of requirements that must be complied with when handling the personal data of European Union-based data subjects including: providing expanded disclosures about how their personal data will be used; higher standards for organizations to demonstrate that they have obtained valid consent or have another legal basis in place to justify their data processing activities; the obligation to appoint data protection officers in certain circumstances; new rights for individuals to be “forgotten” and rights to data portability, as well as enhanced current rights (e.g. access requests); the principal of accountability and demonstrating compliance through policies, procedures, training and audit; and a new mandatory data breach regime. In particular, medical or health data, genetic data and biometric data where the latter is used to uniquely identify an individual are all classified as “special category” data under the GDPR and afforded greater protection and require additional compliance obligations. Further, European Union member states have a broad right to impose additional conditions – including restrictions – on these data categories. This is because the GDPR allows European Union member states to derogate from the requirements of the GDPR mainly in regard to specific processing situations (including special category data and processing for scientific or statistical purposes). As the European Union states continue to reframe their national legislation to harmonize with the GDPR, we will need to monitor compliance with all relevant European Union member states’ laws and regulations, including where permitted derogations from the GDPR are introduced. We will also be subject to evolving European Union laws on data export, if we transfer data outside the European Union to ourselves or third parties outside of the European Union. The Cayman Islands Government enacted the Data Protection Act on May 18, 2017 (as amended, the “DPA”). The DPA regulates the processing of personal data in the Cayman Islands. Under the DPA, the Company is a “data controller” and the Company’s affiliates and/or its delegates may be “data processors” (or, in some circumstances, data controllers in their own right), in respect of such personal data. U.S. Foreign Corrupt Practices Act and Anti-bribery Regulations In general, the Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, prohibits offering to pay, paying, promising to pay, or authorizing the payment of money or anything of value to a foreign official in order to influence any act or decision of the foreign official in his or her official capacity or to secure any other improper advantage in order to obtain or retain business for or with, or in order to direct business to, any person. The prohibitions apply not only to payments made to “any foreign official,” but also to those made to “any foreign political party or official thereof,” to “any candidate for foreign political office” or to any person, while knowing that all or a portion of the payment will be offered, given, or promised to anyone in any of the foregoing categories. “Foreign officials” under the FCPA include officers or employees of a department, agency, or instrumentality of a foreign government. The term “instrumentality” is broad and can include state-owned or state-controlled entities. Importantly, United States authorities deem most healthcare professionals and other employees of foreign hospitals, clinics, research facilities and medical schools in countries with public healthcare and/or public education systems to be “foreign officials” under the FCPA. When we interact with foreign healthcare professionals and researchers in testing and marketing our products abroad, should any of our product candidates receive foreign regulatory approval in the future, we must have policies and procedures in place sufficient to prevent us and agents acting on our behalf from providing any bribe, gift or gratuity, including excessive or lavish meals, travel or entertainment in connection with marketing our products and services or securing required permits and approvals. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring us to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations. 32 We are also subject to U.K. Bribery Act of 2010, which prohibits both domestic and international bribery, as well as bribery across both private and public sectors. In addition, an organization that “fails to prevent bribery” committed by anyone associated with the organization can be charged under the U.K. Bribery Act unless the organization can establish the defense of having implemented “adequate procedures” to prevent bribery. As we expand our operations, we are likely to be subject to additional laws and restrictions relating to anti-bribery. Environmental, Health, and Safety Regulation We are subject to numerous federal, state, and local environmental, health, and safety (“EHS”) laws and regulations relating to, among other matters, safe working conditions, product stewardship, environmental protection, and handling or disposition of products, including those governing the generation, storage, handling, use, transportation, release, and disposal of hazardous or potentially hazardous materials, medical waste, and infectious materials that may be handled by our partner research laboratories. Some of these laws and regulations also require us to obtain licenses or permits to conduct our operations. If we fail to comply with such laws or obtain and comply with the applicable permits, we could face substantial fines or possible revocation of our permits or limitations on our ability to conduct our operations. Certain of our development and manufacturing activities may involve, from time to time, use of hazardous materials, and we believe we are in compliance with the applicable environmental laws, regulations, permits, and licenses. However, we cannot ensure that EHS liabilities will not develop in the future. EHS laws and regulations are complex, change frequently and have tended to become more stringent over time. Although the costs to comply with applicable laws and regulations, have not been material, we cannot predict the impact on our business of new or amended laws or regulations or any changes in the way existing and future laws and regulations are interpreted or enforced, nor can we ensure we will be able to obtain or maintain any required licenses or permits. Employees As of December 31, 2023, we had a total of seven full-time employees and two consultants. We currently rely on several consultants who provide services to our Company. None of our employees are represented by a labor union or covered by collective bargaining agreements. We consider our relationship with our employees to be good. We anticipate that the number of employees will increase as we continue to develop the assets in our pipeline and other clinical assets that we seek to develop. Additionally, we utilize and expect to continue to utilize clinical research organizations and third parties to perform our pre-clinical studies, clinical studies, and manufacturing. Corporate Information We were incorporated under the name “Murphy Canyon Acquisition Corp.” in October 2021 under the laws of the State of Delaware for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We changed our name to “Conduit Pharmaceuticals Inc.” in connection with the completion of the Business Combination in September 2023. Our principal executive offices are located at 4995 Murphy Canyon Road, Suite 300, San Diego, CA 92123. Our telephone number is +1 (760) 471-8536, and our website can be found at https://www.conduitpharma.com .