What changed in this filing

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Item 1A. Risk Factors

2021-08-16 compared with 2021-05-07 · 80 added, 71 removed, 696 unchanged (18% of the section changed)

6 unchanged sentences

We depend heavily on the success of our lead product candidate, ELX-02.

If ELX-02 fails during development or suffers any material delays, it may adversely impact the commercial viability of ELX-02 and our business.

If ELX-02 fails during development or suffers any material development delays, it may adversely impact the commercial viability of ELX-02 and our business.

We currently have no products approved for sale.

We have invested substantial efforts and financial resources in the research and development of ELX-02, which is currently our only product candidate in clinical development.

We have invested substantial efforts and financial resources primarily in the research and development of ELX-02, which is currently our only product candidate in clinical development.

We have increased investment in our preclinical candidate portfolio but have yet to advance other molecules into clinical development.

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If we do not achieve regulatory approval in a timely manner or at all, we could experience significant delays or an inability to commercialize our current or future product candidates, which would materially adversely affect our business.

The success of our business, including our ability to finance our Company and generate revenue from products in the future, which we do not expect will occur for several years, if ever, will depend heavily on the successful development and eventual commercialization of the product candidates we develop.

The success of our business, including our ability to finance our Company and generate revenue from products in the future, which we do not expect will occur for several years, if ever, will depend heavily on the successful development and any eventual commercialization of the product candidates we develop.

Our current product candidates, and any future product candidates we develop, will require additional preclinical and clinical development, management of clinical, preclinical and manufacturing activities, marketing approval in the United States and other markets, demonstrating cost-effectiveness to pricing and reimbursement authorities, obtaining sufficient manufacturing supply for both clinical development and commercial production in accordance with current Good Manufacturing Practices (“cGMP”) or similar regulatory requirements outside the United States, building of a commercial organization, and substantial investment and significant marketing efforts before we generate any revenue from product sales.

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COVID-19 is continuing to evolve and we continue to work closely with our clinical trial sites and investigators to ensure that patient enrollment will continue as quickly as is feasible in a safe environment for our patients.

While we remain committed to completing enrollment in the first four treatment arms by mid-2021 and reporting data in the second half of 2021, contingent on no further disruptions due to the COVID-19 pandemic , we cannot provide assurances as to when this will be accomplished or whether we will incur significant additional costs, expend additional resources or be subject to additional regulatory requirements, including COVID-19 related disruptions, any of which may have a material adverse impact on our financial condition and results of operations.

While we believe that we have enrolled a sufficient number of patients to assess biological activity of ELX-02, and expect to present data from the first four treatment arms of the study in the fourth quarter of this year , we cannot provide assurances as to whether we will incur significant additional costs, expend additional resources or be subject to additional regulatory requirements, including COVID-19 related disruptions, any of which may have a material adverse impact on our financial condition and results of operations.

Clinical trials must be conducted in accordance with the FDA and other applicable regulatory authorities’ legal requirements, regulations or guidelines, and are subject to oversight by these governmental agencies and ethics committees or IRBs at the medical institutions where the clinical trials are conducted.

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Additionally, a clinical hold may also result in, among other things, protocol redesign, changes in eligibility criteria and increased costs, any of which could adversely affect our projected development timelines and jeopardize successful completion of our clinical programs.

If we experience delays in the completion of any clinical trial of our product candidates, the commercial prospects of our product candidates may be impaired and our ability to generate product revenues from such product candidates may be delayed.

If we experience delays in the completion of any clinical trial of our product candidates, the commercial prospects of our product candidates and the ability to generate revenues may be impaired.

In addition, any delays in completing our clinical trials may increase our costs, slow down our product development and approval process and may jeopardize our ability to commence product sales and generate revenues.

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Any arrangements with prescribers must be for bona fide services and compensated at fair market value.

There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution, but the exceptions and safe harbors are drawn narrowly and require strict compliance in order to offer protection.

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

federal civil and criminal false claims laws, including without limitation, the civil False Claims Act, which can be enforced by private citizens on behalf of the U.S.

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HIPAA, which imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing, or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items, or services.

Similar to the federal Anti-Kickback Statute, a person or

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

Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

analogous U.S.

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For example, in preclinical testing of ELX-02, we observed renal toxicities in the animals we tested following administration of this compound at doses in excess of the doses we expect to administer in our clinical trials.

As a result of this or any other side effects, our clinical

trials could be suspended or terminated or not even allowed to commence, and the FDA or comparable foreign regulatory authorities could order us to cease further development, or deny approval, of our product candidates for any or all targeted indications.

The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims.

As a result of this or any other side effects, our clinical trials could be suspended or terminated or not even allowed to commence, and the FDA or comparable foreign regulatory authorities could order us to cease further development, or deny approval, of our product candidates for any or all targeted indications.

The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the

trial or result in potential product liability claims.

If we are required to delay, suspend or terminate any clinical trial or commercialization efforts, the commercial prospects of such product candidates may be harmed, and our ability to generate product revenues from them or other product candidates that we develop may be delayed or eliminated.

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Failure or delay in the commencement or completion of our clinical trials may be caused by several factors, including:

slower than expected rates of patient recruitment, particularly with respect to trials of rare diseases such as nonsense mutation cystic fibrosis;

slower than expected rates of patient recruitment, particularly with respect to trials of rare diseases such as cystic fibrosis caused by nonsense mutations;

determination of dosing levels and corresponding effect analysis;

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The protocols for our clinical trials generally require that patients may not be enrolled in more than one clinical trial for the same indication, which will limit the pool of available subjects.

In addition to the rarity of some diseases, the eligibility criteria of our clinical studies will further limit the pool of available study participants as we will require that patients have specific characteristics that we can measure and that their

disease is not too advanced.

Specifically, some of the diseases that our product candidates are designed to treat are rare and ultra-rare and we expect only a subset of the patients with these diseases will be eligible for our clinical trials.

Because ELX-02 targets small populations and patient numbers have not been determined definitively, we must be able to identify patients in order to complete our development programs, potentially secure regulatory approval for, and if approved, successfully commercialize ELX-02.

Because ELX-02 targets small populations and patient numbers have not been determined definitively, we must be able to identify patients

in order to complete our development programs, potentially secure regulatory approval for, and if approved, successfully commercialize ELX-02.

We cannot guarantee that any of our programs will identify a sufficient number of patients to complete clinical development, pursue regulatory approval and market our product candidates, if approved.

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We are also evaluating additional clinical sites in other countries where patient enrollment may be feasible.

We also evaluated additional clinical sites in other countries where patient enrollment may be feasible , such as Australia and Canada.

Additionally, significant additional costs as a result of this delay in enrollment or failure to complete enrollment in accordance with our objectives may have a material adverse impact on our financial condition and results of operations.

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We depend on independent investigators, consultants, researchers, medical experts, collaborators, chemists, toxicologists and a small number of medical institutions and third-party contract research organizations to assist with our research efforts and conduct our preclinical and clinical trials and related activities.

These collaborators, scientists,

consultants and other third parties have provided, and we expect that they will continue to provide, valuable advice and services regarding our clinical development programs and product candidates.

These collaborators, scientists, consultants and other third parties are not our employees, may have other commitments that would limit their future availability to us and typically will not enter into non-compete agreements with us.

These collaborators, scientists, consultants and other third parties have provided, and we expect that they will continue to provide, valuable advice and services regarding our clinical development programs and product candidates.

These collaborators, scientists, consultants and other third parties are not our employees, may have other commitments that would limit their future availability to us and

typically will not enter into non-compete agreements with us.

We cannot control the amount or timing of resources that they devote to our preclinical and or clinical development programs and they may not assign as great a priority to our preclinical or clinical development programs or pursue them as diligently as we would if we were undertaking such programs directly.

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Interim, “topline” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

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

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

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

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

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

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

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

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

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

As a result, topline and preliminary data should be viewed with caution until the final data are available.

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

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

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

If the interim, topline, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions or interpretations reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could negatively impact our business, operating results, prospects or financial condition.

The regulatory approval processes of the FDA and comparable regulatory authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.

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Even if we believe the nonclinical or clinical data for our product candidates are promising, such data may not be sufficient to support approval by the FDA and other regulatory authorities.

The FDA or other regulatory authority may also require us to conduct additional preclinical studies or

clinical trials for our product candidates either prior to or post-approval, or it may object to elements of our clinical development program.

The FDA or other regulatory authority may also require us to conduct additional preclinical studies or clinical trials for our product candidates either prior to or post-approval, or it may object to elements of our clinical development program.

The FDA or any foreign regulatory authorities or bodies can delay, limit or deny approval of our drug product candidates or require us to conduct additional nonclinical or clinical testing or abandon a program for a variety of reasons, including the following:

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The Patient Protection and Affordable Care Act, or PPACA, was enacted in March 2010.

This law substantially changed the way healthcare is financed by both governmental and private insurers in the Unites States, and significantly impacts the pharmaceutical industry.

This law substantially changed the way healthcare is financed by both governmental and private insurers in the Unites States, and significantly

impacts the pharmaceutical industry.

PPACA contains a number of provisions that are expected to impact our business and operations, in some cases in ways we cannot currently predict.

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These changes will impact existing government healthcare programs and will result in the development of new programs, including Medicare payment for performance initiatives and improvements to the physician quality reporting system and feedback program.

In early 2016, CMS issued final regulations to implement the changes to the Medicaid Drug Rebate Program under PPACA.

In early 2016, the Centers for Medicare and Medicaid Services issued final regulations to implement the changes to the Medicaid Drug Rebate Program under PPACA.

Moreover, in the future, Congress could enact legislation that further increases Medicaid drug rebates or other costs and charges associated with participating in the Medicaid Drug Rebate Program.

Legislative changes to the PPACA also remain possible.

The issuance of regulations and coverage expansion by various governmental agencies relating to the Medicaid Drug Rebate Program has increased and will continue to increase our costs and the complexity of compliance, has been and will be time-consuming, and could have a material adverse effect on our results of operations.

The issuance of regulations and coverage expansion by various governmental agencies relating to the Medicaid Drug Rebate Program will , upon commercialization of our drug product candidates, increase our costs and the complexity of compliance, will be time-consuming, and could have a material adverse effect on our results of operations.

Governments in countries where we operate have adopted or have shown significant interest in pursuing legislative initiatives to reduce costs of healthcare.

We expect that the implementation of current laws and policies, the amendment of those laws and policies in the future, as well as the adoption of new laws and policies, could have a material adverse effect on our industry generally and on our ability to generate or increase future product sales, if any, or successfully commercialize our product candidates, or could limit or eliminate our future spending on development projects.

We expect that the implementation of current laws and policies, the amendment of those laws and policies in the future, as well as the adoption of new laws and policies, could have a material adverse effect on our industry generally and on our ability to generate future product sales, if any, or successfully commercialize our product candidates, or could limit or eliminate our future spending on development projects.

In many cases, these government initiatives, even if enacted into law, are subject to future rulemaking by regulatory agencies.

Although we have evaluated these government initiatives and the impact on our business, we cannot know with certainty whether any such law, rule or regulation will adversely affect coverage and reimbursement of our product candidates, or to what extent, until such laws, rules and regulations are promulgated, implemented and enforced, which could sometimes take many years.

The announcement or adoption of regulatory or legislative proposals could delay or prevent our entry into new markets, affect our reimbursement or sales in the markets where we are already selling our approved products, if any, and materially harm our business, financial condition and results of operations.

The announcement or adoption of regulatory or legislative proposals could delay or prevent our entry into new markets, affect our reimbursement or sales in the markets where we may be selling our approved products, and materially harm our business, financial condition and results of operations.

Risks Related to Our Financial Position and Need for Additional Capital

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We may never achieve or maintain profitability.

We have a history of net losses and negative cash flows from operating activities since inception and, as of March 31, 2021, had an accumulated deficit of $180.3 million.

We have a history of net losses and negative cash flows from operating activities since inception and, as of June 30, 2021, had an accumulated deficit of $216.3 million.

We have financed our operations primarily through equity securities, and to a lesser extent from loans and grants.

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Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity and debt financings, as well as entering into new collaborations, strategic alliances and licensing arrangements.

arrangements.

We do not have any committed external source of funds.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, an investor’s ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that may adversely affect an investor’s rights as a common stockholder.

To the extent that we raise additional capital through the sale of equity , such as our public offering of shares in May 2021, or convertible debt securities, an investor’s ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that may adversely affect an investor’s rights as a common stockholder.

Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, and may be secured by all or a portion of our assets.

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If we are unable to raise additional funds through equity or debt financings or through collaborations, strategic alliances or licensing arrangements when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

We do not intend to pay dividends for the foreseeable future.

We have never declared or paid any dividends on our common stock and do not intend to pay any dividends in the foreseeable future.

We anticipate that we will retain all of our future earnings for use in the operation of our business and for general corporate purposes.

Any determination to pay dividends in the future will be at the discretion of our board of directors.

Risks Related to Our Business and Operations

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Even if we are able to integrate the business operations successfully, there can be no assurance that this integration will result in the realization of the full benefits of synergies, innovation and operational efficiencies that may be possible from this integration and that these benefits will be achieved within a reasonable period of time.

It is also possible that undisclosed, contingent or other liabilities or problems in connection with the acquired company may arise in the future of which we were previously unaware.

These undisclosed liabilities could have an adverse effect on our business, financial condition and prospects.

We continue to seek opportunities to expand our business through strategic initiatives.

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To manage effectively our current and future potential growth, we must also continue to enhance and develop our global employee base, and our operational and financial processes.

Supporting our growth strategy will require significant capital expenditures and management resources, including investments in research, development, sales and marketing, manufacturing and other areas of our operations.

Supporting our growth strategy will require significant

capital expenditures and management resources, including investments in research, development, sales and marketing, manufacturing and other areas of our operations.

The development or expansion of our business, any acquired business or any acquired or in-licensed products may require a substantial capital investment by us.

We may not have these necessary funds, or they might not be available to us on acceptable terms or at all.

We may also seek to raise funds by selling shares of our capital stock, or securities convertible into our capital stock, which could dilute current stockholders’ ownership interest in our company.

We may also seek to raise funds by selling shares of our capital stock, or securities convertible into our capital stock, which could dilute current stockholders’ ownership interest in our C ompany.

Our business could be affected by litigation, government investigations and enforcement actions.

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Public health epidemics or widespread outbreaks of contagious diseases could adversely impact our business.

Any outbreak of contagious diseases, and other adverse public health developments, such as the recent novel strain of COVID-19, initially limited to a region in China and now affecting the global community, could impact our operations depending on future developments, which are highly uncertain, largely beyond our control and cannot be predicted with certainty.

Any outbreak of contagious diseases, and other adverse public health developments, such as the recent novel strain of COVID-19, could impact our operations depending on future developments, which are highly uncertain, largely beyond our control and cannot be predicted with certainty.

These uncertain factors include the duration of the outbreak, new information which may emerge concerning the severity of the disease and the actions to contain or treat its impact, could adversely impact our operations, including among others, conduct of our clinical trials, employee mobility and productiveness, temporary closure of facilities, including clinical trial sites, our manufacturing capabilities, and third party service providers such as CROs, any of which could have an adverse impact on our business and our financial results.

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Numerous other countries have also developed, or are developing, laws governing the collection, use and transmission of personal information.

EU member states and other jurisdictions have adopted data protection laws and regulations, which

impose significant compliance obligations.

EU member states and other jurisdictions have adopted data protection laws and regulations, which impose significant compliance obligations.

For example, in May 2016, the EU formally adopted the General Data Protection Regulation, or GDPR, which applies to all EU member states as of May 25, 2018 and replaces the former EU Data Protection Directive.

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If these third parties do not properly and successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval of or commercialize our product candidates.

We have utilized and plan to continue to utilize and depend upon independent investigators and collaborators, such as medical institutions, CROs, CMOs and strategic partners to conduct and support our preclinical studies and clinical trials.

We have utilized and plan to continue to utilize and depend upon independent investigators and collaborators, such as medical institutions, CROs, CMOs, consultants and strategic partners to conduct and support our preclinical studies and clinical trials.

As a result, we will have less direct control over the conduct, timing and completion of these preclinical studies and clinical trials and the management of data developed.

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Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, principal investigators and trial sites.

If we or any of these third parties fail to comply with applicable GCP regulations, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications.

If we or any of these third parties fail to

comply with applicable GCP regulations, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications.

We cannot assure you that, upon inspection, such regulatory authorities will determine that any of our clinical trials comply with the GCP regulations.

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Our business is specialized and global and we must attract and retain highly qualified individuals across many geographies.

We may not be able to continue to attract and retain the highly qualified personnel necessary for developing, manufacturing and commercializing our product candidates.

We may not be able to continue to attract and retain the highly qualified personnel necessary for developing, manufacturing and commercializing our product

If we are unsuccessful in our recruitment and retention efforts, or if our recruitment efforts take longer than anticipated, our business may be harmed.

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If we fail to adequately protect or enforce our intellectual property rights or secure rights to third party patents, the value of our intellectual property rights would diminish, and our business, competitive position and results of operations would suffer.

As of March 31, 2021, we owned or licensed 30 issued patents and 45 pending patent applications in the U.S.

As of June 30, 2021, we owned or licensed 41 issued patents and 72 pending patent applications in the U.S.

and abroad, not including U.S.

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Furthermore, if the U.S.

Patent and Trademark Office or foreign patent offices issue patents to us or our licensors, others may challenge the patents or circumvent the patents, or the patent office or the courts may invalidate the patents.

Patent and Trademark Office or foreign patent offices issue patents to us or our licensors, others may challenge the

patents or circumvent the patents, or the patent office or the courts may invalidate the patents.

Thus, any patents we own or license from or to third parties may not provide any protection against our competitors and those who infringe upon our patents.

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With regard to our lead compound ELX-02, patents that have issued or that may issue in the future from our primary composition of matter patent family are currently set to expire in 2031.

We have pending patent families directed to specific methods of manufacturing ELX-02 and using ELX-02 to treat various ocular

conditions, and any patents that may issue from these families would be expected to expire in 2038 and 2039, respectively.

We have pending patent families directed to specific methods of manufacturing ELX-02 and using ELX-02 to treat various ocular conditions, and any patents that may issue from these families would be expected to expire in 2038 and 2039, respectively.

However, these applications may not issue, and even if they do issue the resultant patents may not provide adequate coverage to meaningfully block competitors from launching their products.

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In addition, our business requires using sensitive technology, techniques and proprietary compounds that we protect as trade secrets.

However, we may also rely heavily on collaboration with, or discuss the potential for collaboration with, suppliers, outside scientists and other biopharmaceutical companies.

However, we may also rely heavily on collaboration with, or discuss the potential for collaboration with,

suppliers, outside scientists and other biopharmaceutical companies.

Collaboration and discussion of potential collaboration present a strong risk of exposing our trade secrets.

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If we are found to be infringing on patents owned by others, we may be forced to pay damages to the patent owner and/or obtain a license to continue the manufacture, sale or development of our product candidates.

If we cannot obtain a

license, we may be prevented from the manufacture, sale or development of our product candidates, which would adversely affect our business.

If we cannot obtain a license, we may be prevented from the manufacture, sale or development of our product candidates, which would adversely affect our business.

If we infringe the rights of third parties, we could be prevented from selling products, forced to pay damages and required to defend against litigation which could result in substantial costs and may have a material adverse effect on our business, results of operations and financial condition.

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These damages potentially include royalties, increased damages (possibly treble damages) and attorneys’ fees if we are found to have infringed such rights willfully.

Further, if a patent infringement suit is brought against us, our development, manufacturing or sales activities relating to the product, product candidate or technology that is the subject of the suit may be delayed or terminated, as parties making claims against us may obtain injunctive or other equitable relief.

making claims against us may obtain injunctive or other equitable relief.

As a result of patent infringement claims, or in order to avoid potential infringement claims, we may choose to seek, or be required to seek, a license from the third party, which may require payment of substantial royalties or fees, or require us to grant a cross-license under our intellectual property rights.

These licenses may not be available on reasonable terms or at all.

If we are unable to enter into a license on acceptable terms, we could be prevented from commercializing one or more of our products or product candidates, or forced to modify such products or product candidates, or to cease some aspect of our business operations, which could harm our business

significantly.

We might also be forced to redesign or modify our products, product candidates or technologies so that we no longer infringe the third-party intellectual property rights, which may result in significant cost or delay to us, or which redesign or modification could be impossible or technically infeasible.

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With respect to such grants we are obligated to pay royalties at a rate in the low to middle single digit percentage from the revenue generated from the sale of any products or services developed using IIA grants up to a maximum amount equal to repayment of the grant proceeds received plus accrued interest.

We have not commenced the payment obligation of these royalties since we have not yet generated revenue, and we have a contingent obligation with respect to such future royalty payments including interest, of $2.7 million.

We have not commenced the payment obligation of these

royalties since we have not yet generated revenue, and we have a contingent obligation with respect to such future royalty payments including interest, of $2.7 million.

The R&D Law and terms of the prior grants restrict the transfer of certain know-how, and the transfer of manufacturing or manufacturing rights of products developed with grant funds, outside of Israel, without the prior approval of the IIA.

Therefore, if aspects of our technologies are deemed to have been developed with IIA funding according to the R&D Law,

the discretionary approval of the IIA may be required for any assignment and/or transfer to third parties inside or outside of Israel of know-how or transfer outside of Israel of manufacturing or manufacturing rights and may result in payment of increased royalties and/or payment of additional amounts to the IIA.

Therefore, if aspects of our technologies are deemed to have been developed with IIA funding according to the R&D Law, the discretionary approval of the IIA may be required for any assignment and/or transfer to third parties inside or outside of Israel of know-how or transfer outside of Israel of manufacturing or manufacturing rights and may result in payment of increased royalties and/or payment of additional amounts to the IIA.

Furthermore, the IIA may impose certain conditions on any arrangement under which it permits us to transfer technology or development outside of Israel.

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As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002(the “Sarbanes-Oxley Act”), and Nasdaq stock market rules.

The requirements of these rules and regulations have increased and will continue to significantly increase our legal and financial compliance costs, including costs associated with the hiring of additional personnel, making some activities more difficult, time-consuming or costly, and may also place undue

strain on our personnel, systems and resources.

The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and financial condition.

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Internal Revenue Code of 1986, as amended, (the “Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-ownership change NOLs to offset future taxable income.

We may have experienced ownership changes in the past, We may experience additional ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control.

We may have experienced ownership changes in the past.

We may experience additional ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which may be outside of our control.

Although we have not completed our analysis, it is reasonably possible that our federal NOLs available to offset future taxable income could materially decrease.

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As a result, if some or all of them acted together, they would have the ability to exert substantial influence over the election of our board of directors and the outcome of issues requiring approval by our stockholders.

This concentration of ownership may have the effect of delaying or preventing a change in control of our company that may be favored by other stockholders.

This concentration of ownership may have the effect of delaying or preventing a change in control of our company that may be favored by other

stockholders.

This could prevent the consummation of transactions favorable to other stockholders, such as a transaction in which stockholders might otherwise receive a premium for their shares over current market prices.

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Additional capital will be needed in the future to continue our planned operations.

To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution.

To the extent we raise additional capital by issuing equity securities, such as our public offering of shares in May 2021, our stockholders may experience substantial dilution.

We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner, we determine from time to time.

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Pursuant to our 2018 Equity Incentive Plan, our management is authorized to grant stock options and other equity-based awards to our employees, directors and consultants.

As of March 31, 2021, individuals held share awards to purchase or receive an aggregate of 4,986,331 shares of our common stock.

As of June 30, 2021, individuals held share awards to purchase or receive an aggregate of 8,614,506 shares of our common stock.

If our board of directors elects to increase the number of shares available for future grant by the maximum amount each year, our stockholders may experience additional dilution, which could have a negative effect on our share price.

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December 27, 2017

Employment offer letter between Eloxx Pharmaceuticals, Inc.

and Gary D Rakers dated March 26, 2021

Employment Agreement, dated as of April 1, 2021, by and between Sumit Aggarwal and Eloxx Pharmaceuticals, Inc.

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April 1, 2021

Lease agreement by and between Zikani Therapeutics, Inc.

and ARE-480 Arsenal Street, LLC, dated July 28, 2015

First Amendment to Lease agreement by and between Zikani Therapeutics, Inc.

and ARE-480 Arsenal Street, LLC, dated June 30, 2020

Separation Agreement and General Release, dated as of April 1, 2021, by and between Gregory C.

Williams and Eloxx Pharmaceuticals, Inc.

April 1, 2021

Agreement and General Release, dated as of July 2, 2021, by and between Neil S.

Belloff and Eloxx Pharmaceuticals, Inc.

Certification of the Company’s Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities and Exchange Act of 1934, as amended, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

7 unchanged sentences

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

Inline XBRL Taxonomy Extension Definition Linkbase Document.

Incorporated by Reference

Exhibit Description

Inline XBRL Taxonomy Extension Definition Linkbase Document.

Inline XBRL Taxonomy Extension Label Linkbase Document.

1 unchanged sentence

Cover Page Interactive Data File (embedded within the Inline XBRL document)

Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K.

Eloxx hereby agrees to furnish supplementally a copy of any of the omitted schedules upon request by the U.S.

Securities and Exchange Commission.

Filed herewith.

3 unchanged sentences

ELOXX PHARMACEUTICALS, INC.

August 16, 2021

/s/ Daniel E.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors