What changed in this filing

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Item 1A. Risk Factors

2021-05-06 compared with 2020-11-10 · 157 added, 274 removed, 1056 unchanged (29% of the section changed)

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Since inception, we have incurred significant operating losses.

Our net loss was $82.7 million for the year ended December 31, 2019 and $53.1 million for the nine months ended September 30, 2020.

As of September 30, 2020, we had an accumulated deficit of $203.9 million.

To date, we have primarily funded our operations through the issuance of common stock in a private placement and in our initial public offering, or IPO, the issuance of convertible preferred stock and convertible notes, an upfront payment received under the collaboration and license agreement with Acceleron Pharma Inc., or Acceleron, and an upfront payment received under the collaboration and license agreement, or the MyoKardia Collaboration Agreement, with MyoKardia, Inc., or MyoKardia.

Our net loss was $70.8 million for the year ended December 31, 2020 and $17.0 million for the three months ended March 31, 2021.

As of March 31, 2021, we had an accumulated deficit of $238.6 million.

To date, we have funded our operations primarily from the sale of shares of our common stock in public offerings, a private placement, and in “at-the-market” offerings, through issuances of convertible preferred stock, and from upfront payments received under our collaboration and license agreements.

We have devoted substantially all of our financial resources and efforts to research and development, including clinical trials and preclinical studies.

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We anticipate that our expenses will increase substantially as we:

continue our clinical development of losmapimod, including our ongoing Phase 2b and Phase 2 open label clinical trials for the treatment of facioscapulohumeral muscular dystrophy, or FSHD, and our ongoing Phase 3 clinical trial for the treatment of COVID-19;

continue our clinical development of FTX-6058, including our ongoing Phase 1 clinical trial in healthy volunteers;

continue our clinical development of losmapimod, including our ongoing Phase 2b and Phase 2 open label clinical trials for the treatment of facioscapulohumeral muscular dystrophy, or FSHD;

continue our clinical development of FTX-6058, including our ongoing Phase 1 clinical trial in healthy adult volunteers and our planned clinical trial of FTX-6058 in patients with SCD;

continue our ongoing preclinical studies;

advance clinical-stage product candidates into later stage trials;

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add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts and our operations as a public company.

To become and remain profitable, we must s ucceed in developing, and eventually commercializing, a product or products that generate significant revenue.

The ability to achieve this success will require us to be effective in a range of challenging activities, including completing preclinical testin g and clinical trials of our product candidates, discovering additional product candidates, obtaining regulatory approval for these product candidates and manufacturing, marketing and selling any products for which we may obtain regulatory approval.

To become and remain profitable, we must succeed in developing, and eventually commercializing, a product or products that generate significant revenue.

The ability to achieve this success will require us to be effective in a range of challenging activities, including completing preclinical testing and clinical trials of our product candidates, discovering additional product candidates, obtaining regulatory approval for these product candidates and manufacturing, marketing and selling any products for which we may obtain regulatory approval.

We are only in the preliminary stages of most of these activities.

We may never succeed in these activities and, even if we do, may never generate revenues that are significant enough to achieve profitability.

Because of the numerous risks and uncertainties asso ciated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability.

Our expenses will increase if, among other things:

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If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

We expect to devote substantial financial resources to our ongoing and planned activities, particularly as we continue our Phase 2b and Phase 2 open label clinical trials of losmapimod for the treatment of FSHD, continue our recently initiated Phase 3 clinical trial of losmapimod for the treatment of COVID-19, and continue our recently initiated Phase 1 clinical trial of FTX-6058, and continue research and development and initiate additional clinical trials of, and seek regulatory approval for, these and other product candidates.

We expect to devote substantial financial resources to our ongoing and planned activities, particularly as we continue our Phase 2b and Phase 2 open label clinical trials of losmapimod for the treatment of FSHD, continue our Phase 1 clinical trial of FTX-6058 in healthy adult volunteers, prepare for our planned clinical trial of FTX-6058 in patients with SCD, continue research and development and initiate additional clinical trials of, and seek regulatory approval for, these and other product candidates.

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we advance our preclinical activities and clinical trials.

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Our future capital requirements will depend on many factors, including:

the progress, costs and results of our ongoing Phase 2b and Phase 2 open label clinical trials of losmapimod for the treatment of FSHD, our ongoing Phase 3 clinical trial of losmapimod for the treatment of COVID-19, and our ongoing Phase 1 clinical trial of FTX-6058;

the scope, progress, costs and results of discovery research, preclinical development, laboratory testing and clinical trials for our product candidates;

the progress, costs and results of our ongoing Phase 2b and Phase 2 open label clinical trials of losmapimod for the treatment of FSHD, our ongoing Phase 1 clinical trial of FTX-6058 in healthy adult volunteers and our planned clinical trial of FTX-6058 for the treatment of SCD;

the scope, progress, costs and results of discovery research, preclinical development, laboratory testing and clinical trials for our current product candidates in additional indications or for any future product candidates that we may pursue;

the impact of the COVID-19 pandemic on our business and operations;

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the costs and timing of future commercialization activities, including product manufacturing, sales, marketing and distribution, for any of our product candidates for which we may receive marketing approval;

the amount and timing of revenue, if any, recei ved from commercial sales of our product candidates for which we receive marketing approval;

the amount and timing of revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;

the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property and proprietary rights and defending any intellectual property-related claims;

the extent to which we acquire or in-license other products, product candidates, technologies or data referencing rights.

As of September 30, 2020, we had cash, cash equivalents, and marketable securities of approximately $127.0 million.

We believe that our cash, cash equivalents, and marketable securities as of September 30, 2020 will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2022.

As of March 31, 2021, we had cash, cash equivalents, and marketable securities of approximately $143.9 million.

We believe that our cash, cash equivalents, and marketable securities as of March 31, 2021 will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2022.

However, we have based this estimate on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us.

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We commenced activities in 2015 and are an early-stage company.

Our operations to date have been limited to organizing and staffing our company, business planning, raising capital, establishing our intellectual property, building our discovery platform, identifying drug targets and potential product candidates, in-licensing assets, producing drug substance and drug product material for use in clinical trials and undertaking preclinical studies and conducting clinical trials.

Our operations to date have been limited to organizing and staffing our company, business planning, raising capital, establishing our intellectual property, building our discovery platform, identifying drug targets and potential product candidates, in-licensing assets, producing drug substance and drug product material for use in clinical trials and conducting preclinical studies and conducting clinical trials.

We have not yet demonstrated our ability to successfully develop any product candidate, obtain regulatory approvals, manufacture a commercial scale product or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization.

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We expect our financial condition and operating results to fluctuate significantly from quarter-to-quarter and year-to-year due to a variety of factors, many of which are beyond our control.

Accordingly, stockholders should not rel y upon the results of any quarterly or annual periods as indications of future operating performance.

Accordingly, stockholders should not rely upon the results of any quarterly or annual periods as indications of future operating performance.

The ongoing COVID-19 pandemic has and may continue to affect our ability to initiate and complete current or future preclinical studies or clinical trials, disrupt regulatory activities or have other adverse effects on our business and operations.

In addition, this pandemic may continue to adversely impact economies worldwide, which could result in adverse effects on our business and operations.

The ongoing COVID-19 pandemic has caused many governments to implement measures to slow the spread of the outbreak through quarantines, travel restrictions, heightened border scrutiny, and other measures.

The outbreak and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred;

supply chains have been disrupted;

facilities and production have been suspended;

and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen.

The future progression of the outbreak and its effects on our business and operations are uncertain.

We and our contract manufacturing organizations, or CMOs, and contract research organizations, or CROs, may face disruptions that may affect our ability to initiate and complete preclinical studies or clinical trials, including disruptions in procuring items that are essential for our research and development activities, including, for example, raw materials and API used in the manufacturing of our product candidates, and laboratory supplies for our current and future preclinical studies and clinical trials, in each case, for which there may be shortages because of ongoing efforts to address the outbreak.

In light of the COVID-19 pandemic, we and our contract manufacturing organizations, or CMOs, and contract research organizations, or CROs, may face disruptions that may affect our ability to initiate and complete preclinical studies or clinical trials, including disruptions in procuring items that are essential for our research and development activities, including, for example, raw materials and API used in the manufacturing of our product candidates, and laboratory supplies for our current and future preclinical studies and clinical trials, in each case, for which there may be shortages because of ongoing efforts to address the outbreak.

We and our CMOs and CROs, may face disruptions related to our planned and ongoing clinical trials or future clinical trials arising from delays in IND-enabling studies, manufacturing disruptions, and the ability to obtain necessary institutional review board or other necessary site approvals, as well as enrollment and other delays at clinical trial sites.

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Additionally, the impact of the COVID-19 outbreak in Massachusetts resulted in a temporary reduction in workforce presence at our Cambridge research facility.

While we increased workforce presence at our facilities starting in the second quarter of 2020, not all employees have returned to our facility and we cannot be certain that we will not be required to close our facilities in the future as a result of the COVID-19 outbreak.

A closure of our facility may substantially impact our discovery and translational activities and may delay the experimentation needed to identify novel drug targets, prosecute such targets, identify development candidates for such targets and identify biomarkers that inform the potential clinical development paths for such targets.

Moreover, discovery and implementation of clinical biomarker assays for ongoing clinical trials may be delayed.

Furthermore, any negative impact that the outbreak has on the ability of our CROs to deliver data sets and execute on experimentation could cause substantial delays for our discovery activities and materially impact our ability to fuel our pipeline with new product candidates.

Furthermore, any negative impact that the pandemic has on the ability of our CROs to deliver data sets and execute on experimentation could cause substantial delays for our discovery activities and materially impact our ability to fuel our pipeline with new product candidates.

The pandemic has already caused significant disruptions in the financial markets, and may continue to cause such disruptions, which could impact our ability to raise additional funds through public offerings and may also impact the volatility of our stock price and trading in our stock.

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We cannot be certain what the overall impact of the COVID-19 pandemic will be on our business and it has the potential to adversely affect our business, financial condition, results of operations and prospects.

In the past, we have identified conditions and events that raise substantial doubt about our ability to continue as a going concern and it is possible that we may identify conditions and events in the future that raise substantial doubt about our ability to continue as a going concern.

Previously, we have identified conditions and events that raised substantial doubt about our ability to continue as a going concern, and our independent registered public accounting firm’s report on our consolidated financial statements as of and for the year ended December 31, 2018 that was issued prior to our IPO included a going concern uncertainty paragraph.

With the completion of our private placement of our common stock and IPO, we believe that our existing cash, cash equivalents, and marketable securities as of September 30, 2020 will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2022.

However, we have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

In the future, if we are unable to obtain sufficient funding to support our operations, we could be forced to delay, reduce or eliminate all of our research and development programs, product portfolio expansion or commercialization efforts, and our financial condition and results of operations will be materially and adversely affected and we may be unable to continue as a going concern.

In the future, reports from our independent registered public accounting firm may also include a going concern uncertainty paragraph.

If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms or at all.

Changes in tax laws or in their implementation or interpretation may adversely affect our business and financial condition.

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tax on foreign earnings (subject to certain important exceptions), the allowance of immediate deductions for certain new investments instead of deductions for depreciation expense over time, and the modification or repeal of many business deductions and credits.

As part of Congress’ response to the COVID-19 pandemic, the Families First Coronavirus Response Act, or FFCR Act, was enacted on March 18, 2020, and the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was enacted on March 27, 2020.

Both contain numerous tax provisions.

As part of Congress’ response to the COVID-19 pandemic, the Families First Coronavirus Response Act, or FFCR Act, was enacted on March 18, 2020, the CARES Act was enacted on March 27, 2020 and COVID-19 relief provisions were included in the Consolidated Appropriations Act, 2021, or CAA, which was enacted on December 27, 2020.

All contain numerous tax provisions.

In particular, the CARES Act retroactively and temporarily (for taxable years beginning before January 1, 2021) suspends application of the 80%-of-income limitation on the use of net operating losses, which was enacted as part of the TCJA.

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The CARES Act also temporarily (for taxable years beginning in 2019 or 2020) relaxes the limitation of the tax deductibility for net interest expense by increasing the limitation from 30% to 50% of adjusted taxable income.

Regulatory guidance under the TCJA, the FFCR Act and the CARES Act is and continues to be forthcoming, and such guidance could ultimately increase or lessen impact of these laws on our business and financial condition.

It is also possible that Congress will enact additional legislation in connection with the COVID-19 pandemic, some of which could have an impact on our company.

In addition, it is uncertain if and to what extent various states will conform to the TCJA, the FFCR Act or the CARES Act.

Regulatory guidance under the TCJA, the FFCR Act , the CARES Act and the CAA is and continues to be forthcoming, and such guidance could ultimately increase or lessen impact of these laws on our business and financial condition.

It is also possible that Congress will enact additional legislation in connection with the COVID-19 pandemic, and as a result of the changes in the U.S.

presidential administration and control of the U.S.

Senate, additional tax legislation may also be enacted;

any such additional legislation could have an impact on our company.

In addition, it is uncertain if and to what extent various states will conform to the TCJA, the FFCR Act , the CARES Act and the CAA.

Our ability to use our net operating losses and research and development tax credit carryforwards to offset future taxable income may be subject to certain limitations.

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Approximately $139.7 million of the federal net operating losses can be carried forward indefinitely.

As of December 31, 2020, we also had federal orphan drug credits of $3.0 million, which begin to expire in 2040.

As of December 31, 2020, we also had federal and state research and development tax credit carryforwards of $4.6 million and $2.8 million, respectively, which begin to expire in 2035 and 2030, respectively.

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thus, we do not know whether or when we will generate taxable income necessary to utilize our net operating losses or research and development tax credit carryforwards.

In general, under Section 382 of the Code and corresponding provisions of state law, a corporation that undergoes an “ownership change , ” which is ge nerally defined as a greater than 50% change, by value, in its equity ownership by certain stockholders over a three-year period , is subject to limitations on its ability to utilize its pre-change net operating losses and research and development tax credi t carryforwards to offset future taxable income.

In general, under Section 382 of the Code and corresponding provisions of state law, a corporation that undergoes an “ownership change,” which is generally defined as a greater than 50% change, by value, in its equity ownership by certain stockholders over a three-year period, is subject to limitations on its ability to utilize its pre-change net operating losses and research and development tax credit carryforwards to offset future taxable income.

We have not conducted a study to assess whether any such ownership changes have occurred.

We may have experienced such ownership changes in the past and may experience such ownership changes in the future (w hich may be outside our control).

We may have experienced such ownership changes in the past and may experience such ownership changes in the future (which may be outside our control).

As a result, if, and to the extent that, we earn net taxable income, our ability to use our pre-change net operating losses and research and development tax credit carryforwards to offset such taxable income may be subject to limitations.

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If we are unable to commercialize our product candidates or experience significant delays in doing so, our business will be materially harmed.

We are early in our development efforts, and we have advanced only two product candidates into clinical trials, losmapimod for the treatment of FSHD and for the treatment of COVID-19, and FTX-6058 in healthy volunteers.

We are early in our development efforts, and we have advanced only two product candidates into clinical trials, losmapimod for the treatment of FSHD, and FTX-6058 in healthy adult volunteers.

We have invested substantially all of our efforts and financial resources in our proprietary product engine to identify and validate cellular drug targets that can potentially modulate gene expression to address the root cause of rare diseases.

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If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully develop and commercialize our product candidates, which would materially harm our business.

We may not be successful in our efforts to develop losmapimod for the treatment of patients with COVID-19 .

In June 2020, we initiated a Phase 3, randomized, double-blind, placebo-controlled trial of losmapimod in higher risk hospitalized adults with COVID-19.

This Phase 3 clinical trial is an international, multicenter trial designed to assess the safety and efficacy of a 15 mg twice per day oral dose of losmapimod compared to placebo for 14 days on top of standard of care in approximately 400 patients hospitalized with COVID-19 and at risk of progression to critical illness based on older age and elevated systemic inflammation.

While we have initiated our Phase 3 clinical trial of losmapimod for the treatment of patients with COVID-19, the timing and success of the trial will depend on our ability to reach agreement with clinical trial sites and successfully screen and enroll patients in the trial, which, even if we are able to do, may not be on the timelines we expect.

We experienced delays in establishing clinical trials sites and began enrolling patients in the fourth quarter of 2020.

Many other companies are pursuing the development of product candidates for the treatment of COVID-19, and availability of clinical trial sites and patient enrollment may be affected by availability of commercially available treatments and other clinical trials of competing product candidates.

Patient enrollment may also be affected by other factors, including the incidence of COVID-19 over time and the perceived risks and benefits of the use of losmapimod as a treatment relative to competing treatments.

We have not activated clinical trial sites and enrolled patients in the trial on the timelines that we previously expected, which has resulted in delays to the trial, including expected delays to the completion of the interim analysis previously planned for the fourth quarter of 2020 and the expected reporting of topline data previously planned for the first quarter of 2021.

We may continue to experience these delays or encounter further delays or may decide to abandon the trial and development of losmapimod for the treatment of COVID-19 altogether.

The COVID-19 pandemic may be effectively contained before we can successfully develop losmapimod as a treatment for COVID-19 and recoup our financial investment in the trial through sales of losmapimod.

For example, a vaccine may be developed and available in sufficient quantities to contain the spread of the SARS-CoV-2 virus before we are able to complete our Phase 3 clinical trial and obtain marketing approval.

Similarly, other therapeutics may prove efficacious in treating patients with COVID-19 before we are able to complete the development of losmapimod in this indication.

Our commitment of financial resources and personnel to the development of losmapimod for the treatment of COVID-19 may cause delays in or otherwise negatively impact our other development programs and research and discovery efforts with our product engine.

Additionally, while losmapimod has been previously tested in more than 3,600 subjects, including in clinical trials evaluating the ability of an oral dose of 15 mg twice per day of losmapimod to restore a normal immune response in older patients challenged with a viral antigen, it has not been evaluated as a treatment in the acute infection setting.

It is possible that unexpected safety issues, including issues that have not been observed in prior clinical trials of losmapimod, could occur in patients with COVID-19.

Any such safety issues could affect our development program for losmapimod for the treatment of FSHD and our ability to obtain marketing approval for losmapimod, including our ability to apply for accelerated approval.

In this trial, we plan to administer losmapimod as an add-on to the current standard of care.

The standard of care for COVID-19 patients may change during our trial or following our trial, and the clinical data that we obtain in our Phase 3 clinical trial may not translate to supporting the use of losmapimod as an add-on to a new standard of care.

Given the rapidity of the onset of the COVID-19 pandemic, scientific and medical research on the SARS-CoV-2 virus is ongoing and evolving.

We cannot be certain that the preclinical and clinical evidence that we believe suggests that losmapimod may be beneficial to patients with COVID-19 will be established in a clinical trial.

Similarly, we cannot be certain that the Phase 3 clinical trial will be sufficient to enable us to obtain marketing approval of losmapimod for the treatment of COVID-19, and we may need to conduct additional clinical trials before we are able to apply for marketing approval.

Furthermore, the failure of losmapimod to demonstrate safety and efficacy in patients with COVID-19 could negatively impact the perception of us and losmapimod by investors.

To date, the evaluation of losmapimod for the treatment of COVID-19 has moved quickly through the FDA regulatory review and approval process.

The speed at which all parties are acting to create and test many therapeutics and vaccines for COVID-19 is unusual, and evolving or changing plans or priorities within the FDA, including changes based on new knowledge of COVID-19 and how the disease affects the human body, may significantly affect the regulatory timeline for losmapimod for the treatment of COVID-19.

In the future, we may seek to make losmapimod available for the treatment of COVID-19 through an Emergency Use Authorization Program, or the FDA or other government body may request that losmapimod is made available through an Emergency Use Authorization.

The FDA has the authority to grant an Emergency Use Authorization to allow unapproved medical products to be used in an emergency to diagnose, treat or prevent serious or life-threatening diseases or conditions when there are no adequate, approved and available alternatives.

If we are granted an Emergency Use Authorization for losmapimod for the treatment of COVID-19, we would be able to commercialize losmapimod for the treatment of COVID-19 prior to FDA approval of a new drug application, or NDA.

However, the FDA may revoke an Emergency Use Authorization where it is determined that the underlying health emergency no longer exists or warrants such authorization, and we cannot predict how long, if ever, an Emergency Use Authorization would remain in place.

Such revocation could adversely impact our business in a variety of ways, including if losmapimod for the

treatment of COVID-19 is not yet approved by the FDA via an NDA and if we and our manufacturing partners h ave invested in the supply chain to provide losmapimod for the treatment of COVID-19 under an Emergency Use Authorization.

We may not be successful in our efforts to use our product engine to build a pipeline of product candidates.

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Identifying, developing, obtaining regulatory approval for and commercializing additional product candidates will require substantial additional funding and is prone to the risks of failure inherent in product development.

We cannot provide stockholders any assurance that we will be able to successfully identify additional product candidates with our product engine, including those subject to our collaborations with Acceleron and MyoKardia, advance any of these additional product candidates through the development process or successfully commercialize any such additional product candidates.

We cannot provide stockholders any assurance that we will be able to successfully identify additional product candidates with our product engine, including as a result of our collaborations with Acceleron and MyoKardia, advance any additional product candidates through the development process or successfully commercialize any such additional product candidates.

Regulatory authorities have substantial discretion in the approval process and may cause delays in the approval or rejection of an application.

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Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.

Furthermore, the failure of any of our product candidates to demonstrate safety and efficacy in any clinical trial could negatively

impact the perception o f our other product candidates and/or cause the FDA or other regulatory authorities to require additional testing before approving any of our product candidates.

In February 2019, we entered into a right of reference and license agreement, or the GSK Agreement, with affiliates of GSK pursuant to which, among other things, GSK granted us a right of reference to certain INDs filed with the FDA and controlled by GSK or its affiliates relating to losmapimod and an exclusive worldwide license to certain of GSK’s preclinical and clinical data with respect to losmapimod.

Although losmapimod was originally evaluated by GSK in nearly 3,600 subjects, GSK did not evaluate losmapimod in FSHD or in any other muscular dystrophy, or in novel diseases, such as COVID-19, and most of the subjects in these trials were given a dose that was lower than our planned dosage of 15 mg of losmapimod twice per day, so the safety data generated from GSK’s clinical trials of losmapimod may not be predictive or indicative of the results of our clinical trials.

Furthermore, the failure of any of our product candidates to demonstrate safety and efficacy in any clinical trial could negatively impact the perception of our other product candidates and/or cause the FDA or other regulatory authorities to require additional testing before approving any of our product candidates.

We have entered into a right of reference and license agreement, or the GSK Agreement, as amended, with affiliates of GSK pursuant to which, among other things, GSK granted us a right of reference to certain INDs filed with the FDA and controlled by GSK or its affiliates relating to losmapimod and an exclusive worldwide license to certain of GSK’s preclinical and clinical data with respect to losmapimod.

Although losmapimod was originally evaluated by GSK in nearly 3,600 subjects, GSK did not evaluate losmapimod in FSHD or in any other muscular dystrophy, and most of the subjects in these trials were given a dose that was lower than our planned dosage of 15 mg of losmapimod twice per day, so the safety data generated from GSK’s clinical trials of losmapimod may not be predictive or indicative of the results of our clinical trials.

Similarly, while we believe the safety data from GSK’s clinical trials may, in part, enable us to apply for accelerated approval, there can be no assurance that this will happen.

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the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate;

our product candidates may have undesirable side effects or other unexpected characteristi cs, causing us or our investigators, regulators or IRBs to suspend or terminate the trials;

our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or IRBs to suspend or terminate the trials;

unforeseen global instability, including political instability or instability from an outbreak of pandemic or contagious disease, such as the COVID-19 pandemic, in or around the countries in which we conduct our clinical trials, could delay the commencement or rate of completion of our clinical trials;

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Other regulatory authorities in Europe and other countries may make similar findings with respect to these endpoints.

If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary reg ulatory approvals could be delayed or prevented.

If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.

Identifying and qualifying patients to participate in clinical trials for our product candidates is critical to our success.

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We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we are focusing our research and development efforts on rare neuromuscular disorders, hemoglobinopathies and central nervous system diseases.

In light of the recent COVID-19 pandemic, we have also begun to focus some of our research and development efforts to evaluate losmapimod as a potential treatment for COVID-19.

Because we have limited financial and managerial resources, we are focusing our research and development efforts on rare neuromuscular, muscular, hematologic and central nervous system disorders.

As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential.

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Failure to allocate resources or capitalize on strategies in a successful manner will have an adverse impact on our business.

We are conducting Phase 2b and Phase 2 open label clinical trials of losmapimod in patients with FSHD in Europe and currently plan to conduct additional clinical trials for our product candidates at sites outside the United States and the FDA may not accept data from trials conducted in such locations.

We are currently conducting Phase 2b and Phase 2 open label clinical trials of losmapimod in patients with FSHD in Europe, and a Phase 3 clinical trial of losmapimod for the treatment of COVID-19 at sites in Mexico and South America.

We are conducting Phase 2b and Phase 2 open label clinical trials of losmapimod in patients with FSHD in Europe and Canada and currently plan to conduct additional clinical trials for our product candidates at sites outside the United States , and the FDA may not accept data from trials conducted in such locations.

We are currently conducting Phase 2b and Phase 2 open label clinical trials of losmapimod in patients with FSHD in Europe and Canada.

We may also conduct additional clinical trials outside the United States.

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If the FDA does not accept the data from any trial that we conduct outside the United States, it would likely result in the need for additional trials, which would be costly and time-consuming and could delay or permanently halt our development of the applicable product candidates.

Risks Related to the Commercial ization of our Product Candidates

Risks Related to the Commercialization of our Product Candidates

Even if any of our product candidates receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success, and the market opportunity for any of our product candidates, if approved, may be smaller than we estimate.

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If any of our assumptions or estimates, or these publications, research, surveys or studies prove to be inaccurate, then the actual market for any of our product candidates may be smaller than we expect, and as a result our product revenue may be limited and it may be more difficult for us to achieve or maintain profitability.

Specifically, the commercial opportunity for losmapimod for the treatment of COVID-19 is uncertain given the novel nature of the disease, the rapidity of the onset of the COVID-19 pandemic, the number of recent entrants in the market and the potential that a vaccine may be developed and available in sufficient quantities to contain the spread of the SARS-CoV-2 virus before we are able to complete our Phase 3 clinical trial and obtain marketing approval.

Similarly, other therapeutics may prove efficacious in treating patients with COVID-19 before we are able to complete the development of losmapimod in this indication.

If we are unable to establish sales, marketing and distribution capabilities or enter into sales, marketing and distribution agreements with third parties, we may not be successful in commercializing our product candidates if and when they are approved.

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For example, we are aware of several product candidates in clinical development that could be competitive with product candidates that we may successfully develop and commercialize.

bluebird bio, Inc., Aruvant Sciences, Inc., EpiDestiny, Inc., or EpiDestiny (in colla boration with Novo Nordisk A/S), Imara, Inc.

, Agios Pharmaceuticals, Inc., Forma Therapeutics Holdings, Inc., Sangamo Therapeutics Inc., or Sangamo (in collaboration with Bioverativ Inc.) and CRISPR Therapeutics AG (in collaboration with Vertex Pharmaceuti cals, Inc.) are developing therapeutic approaches for patients with sickle cell disease, or SCD.

Acceleron (in collaboration with Celgene Corp.), Bellicum Pharmaceuticals, Inc., Kiadis Pharma, EpiDestiny (in collaboration with Novo Nordisk A/S), Imara Inc.

, Agios Pharmaceuticals, Inc.

, Forma Therapeutics Holdings, Inc., Orchard Therapeutics plc, Sangamo (in collaboration with Bioverativ, Inc.) and CRISPR Therapeutics AG (in collaboration with Vertex Pharmaceuticals, Inc.) are developing therapeutic approach es for patients with ß-thalassemia.

Eli Lilly and Company , Incyte Corporation , Alexion Pharmaceuticals, Inc.

, InflaRx N.V.

, OncoImmune , Inc.

, NeuroRx , Inc.

, CytoDyn Inc.

, Vanda Pharmaceuticals, Inc.

, CTI Biopharma Corp.

, AstraZeneca PLC , Biohaven Pharmace utical Holding Company Ltd., Chimerix , Inc.

, and Novartis AG, are developing immunomodulating therapeutics for the treatment of COVID-19 , and other companies, such as Moderna, Inc., BioNTech SE (in collaboration with Pfizer Inc.), Novavax, Inc., AstraZenec a PLC, Johnson & Johnson and CureVac B.V.

have COVID-19 vaccine candidates currently in clinical trials .

bluebird bio, Inc., Aruvant Sciences, Inc., EpiDestiny , Inc., or EpiDestiny (in collaboration with Novo Nordisk A/S), Imara , Inc., Agios Pharmaceuticals, Inc., Forma Therapeutics Holdings, Inc., Takeda Pharmaceutical Company Limited, Pfizer, Inc., CSL Behring, Intellia Therapeutics, Inc., Editas Medicine, Inc., Sangamo Therapeutics Inc., or Sangamo (in collaboration with Bioverativ Inc.) and CRISPR Therapeutics AG (in collaboration with Vertex Pharmaceuticals, Inc.) are developing therapeutic approaches for patients with sickle cell disease, or SCD.

Acceleron (in collaboration with Celgene Corp.), Bellicum Pharmaceuticals, Inc., Kiadis Pharma, Imara Inc., Agios Pharmaceuticals, Inc., Forma Therapeutics Holdings, Inc., Ionis Pharmaceuticals, Inc., Orchard Therapeutics plc, Sangamo (in collaboration with Bioverativ , Inc.) and CRISPR Therapeutics AG (in collaboration with Vertex Pharmaceuticals, Inc.) are developing therapeutic approaches for patients with ß-thalassemia.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop.

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If we are unable to obtain adequate levels of reimbursement, our ability to successfully market and sell our product candidates will be adversely affected.

We rely and expect to continue to rely , on contract manufac turing organizations to manufacture our product candidates.

If we are unable to enter into such arrangements as expected or if such organizations do not meet our supply requirements, development and/or commercialization of our product candidates may be del ayed.

We rely , and expect to continue to rely , on contract manufacturing organizations to manufacture our product candidates.

We rely, and expect to continue to rely, on third parties to manufacture clinical supplies of our product candidates and we expect to rely on third parties to manufacture commercial supplies of our products, if and when approved for marketing by applicable regulatory authorities, as well as for packaging, sterilization, storage, distribution and other production logistics.

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If coverage and adequate reimbursement are not available or reimbursement is available only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval.

There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the FDA or similar regulatory authorities outsi de of the United States.

Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution expenses.

Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent.

Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on rei mbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services.

Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services.

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

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If risks related to any of these uncertainties materializes, it could have a material adverse effect on our business.

Clinical trial and product liability lawsuits against us could divert our resources and could cause us to incur substantial liabilities a nd to limit commercialization of any products that we may develop.

Clinical trial and product liability lawsuits against us could divert our resources and could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.

We face an inherent risk of clinical trial and product liability exposure related to the testing of our product candidates in human clinical trials, and we will face an even greater risk if we commercially sell any products that we may develop.

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We rely, and expect to continue to rely, on third parties to conduct our clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials, which may harm our business.

We currently rely on third-party clinical research organizations to conduct our ongoing Phase 2b, Phase 2 open label and Phase 3 clinical trials of losmapimod and our ongoing Phase 1 clinical trial of FTX-6058.

We plan to rely on third-party clinical research organizations or third-party research collaboratives to conduct any future clinical trials.

We currently rely on third-party clinical research organizations to conduct our ongoing Phase 2b and Phase 2 open label clinical trials of losmapimod and our ongoing Phase 1 clinical trial of FTX-6058.

We plan to rely on third-party clinical research organizations or third-party research collaboratives to conduct any future clinical trials, including our planned clinical trial of FTX-6058 in patients with SCD.

We do not plan to independently conduct clinical trials of our other product candidates.

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Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors.

We also rely, and expect to continue to rely , on other third parties to store and distribute d rug supplies for our clinical trials.

Any performance failure on the part of our distributors could delay clinical development or marketing approval of our product candidates or commercialization of our products, producing additional losses and depriving u s of potential product revenue.

We plan to contract with third parties for the manufacture of our product candidates for preclinical and clinical testing and expect to continue to do so for commercialization.

We also rely, and expect to continue to rely , on other third parties to store and distribute drug supplies for our clinical trials.

We contract with, and plan to continue to contract with, third parties for the manufacture of our product candidates for preclinical and clinical testing and expect to continue to do so for commercialization.

This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or products or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.

We do not have any manufacturing facilities.

Although we believe we have obtained sufficient losmapimod tablets from GSK to complete our ongoing Phase 2 and Phase 3 clinical trials and that we have received a sufficient quantity of losmapimod API to complete further clinical trials in FSHD and COVID-19, we cannot be sure we have correctly estimated our drug product and API requirements or that such drug product or API will not expire before we want to use it.

Although we believe we have obtained sufficient losmapimod tablets from GSK to complete our ongoing Phase 2 clinical trials and that we have received a sufficient quantity of losmapimod API to complete further clinical trials in FSHD, we cannot be sure we have correctly estimated our drug product and API requirements or that such drug product or API will not expire before we want to use it.

We have also engaged CMOs to prepare our own API and to manufacture losmapimod tablets.

While we believe that we have all the necessary information from GSK to enable any required technology transfer to a CMO, there can be no assurances that we will be able to effect such transfer in a timely manner.

In addition, although we believe we have obtained sufficient quantities of FTX-6058 for the completion of our ongoing Phase 1 clinical trial, we cannot be sure we have correctly estimated our drug product requirements.

We expect to rely on third parties for the manufacture of FTX-6058 for any future clinical trials and for the manufacture of any future product candidates for preclinical and clinical testing, as well as for commercial manufacture if any of our product candidates receive marketing approval.

In addition, although we believe we have obtained sufficient quantities of FTX-6058 from a CMO for the completion of our ongoing Phase 1 clinical trial, we cannot be sure we have correctly estimated our drug product requirements, which could delay, prevent or impair our development efforts.

We expect to rely on third parties for the manufacture of FTX-6058 for any future clinical trials and for the manufacture of any future product candidates for preclinical and clinical testing.

We also expect to rely on third-party manufacturers or third-party collaborators for the manufacture of commercial supply of any other product candidates for which we or our collaborators obtain marketing approval.

We may be unable to establish any agreements with third-party manufacturers or to do so on acceptable terms.

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Our current and anticipated future dependence upon others for the manufacture of our product candidates or products may adversely affect our future profit margins and our ability to commercialize any products that receive marketing approval on a timely and competitive basis.

We have entered into , and may in the future enter into, collaborations with third parties for the development or commercialization of our product candidates.

If our collaborations are not successful, we may not be able to capitalize on the market potential of these product ca ndidates and our business could be adversely affected.

We have entered into, and may in the future enter into, collaborations with third parties for the discovery, development or commercialization of our product candidates.

If our collaborations are not successful, we may not be able to capitalize on the market potential of these product candidates and our business could be adversely affected.

In December 2019, we entered into a collaboration and license agreement with Acceleron to identify biological targets to modulate specific pathways associated with a targeted indication within the pulmonary disease space.

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Additionally, subject to its contractual obligations to us, if a collaborator of ours is involved in a business combination, the collaborator might deemphasize or terminate the development or commercialization of any product candidate licensed to it by us.

For example, in November 2020, subsequent to our entering into the MyoKardia Collaboration Agreement, MyoKardia was acquired by Bristol-Myers Squibb Company.

Bristol-Myers Squibb Company could determine to reprioritize MyoKardia’s development programs such that it ceases to diligently pursue the development of our programs and/or cause the agreement between MyoKardia and us to terminate.

If one of our collaborators terminates its agreement with us, we may find it more difficult to attract new collaborators and our perception in the business and financial communities could be adversely affected.

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Additionally, we are restricted under our collaboration with Acceleron from researching, developing, manufacturing, commercializing, using, or otherwise exploiting any compound or product for the treatment, prophylaxis, or diagnosis of a targeted indication within the pulmonary disease space that is directed against certain specified biological targets identified by us in the performance of the research activities while we are performing the research activities pursuant to the research plan and for a specified period thereafter.

Under our collaboration with MyoKardia, we are restricted from researching, developing, manufacturing, commercializing, using, or otherwise exploiting any compound or product (a) that is a compound or product under the agreement that is directed against certain targets identified by us in the performance of the research activities for the treatment, prophylaxis, or diagnosis of any indication or (b) for the treatment of any genetically defined cardiomyopathies shown to be related to certain specified genes of interest that are modulated by the targets chosen by MyoKardia under our collaboration, in the case of both (a) and (b), while we are performing the research activities pursuant to the research plan and for a specified period thereafter.

Under our collaboration with MyoKardia, we are restricted from researching, developing, manufacturing, commercializing, using, or otherwise exploiting any compound or product (a) that is a compound or product under the agreement that is directed against certain targets identified by us in the performance of the research activities for the treatment, prophylaxis, or diagnosis of any indication or (b) for the treatment of any genetically defined cardiomyopathies shown to be related to certain specified genes of interest that are modulated by the targets chosen by MyoKardia under our collaboration, in each case, while we are performing the research activities pursuant to the research plan and for a specified period thereafter.

Collaborations are complex and time-consuming to negotiate and document.

In addition, there have been a significant number of recent business combinations among large pharmaceutical and biotechnology companies that have resulted in a reduced number of potential future collaborators.

If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms or at all, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other deve lopment programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense.

If we elect to fund and undertake d evelopment or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all.

If we fail to enter into collaborations and do not have sufficient fun ds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our product candidates or bring them to market or continue to develop our product engine.

If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms or at all, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense.

If we elect to fund and undertake development or commercialization activities on our own, we may need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all.

If we fail to enter into collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be able to further develop our product candidates or bring them to market or continue to develop our product engine.

Risks Related to our Intellectual Property

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Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents and our ability to obtain, protect, maintain, defend and enforce our patent rights, narrow the scope of our patent protection and, more generally, could affect the value or narrow the scope of our patent rights.

Currently, our patent portfolio related to FTX-6058 is in early stages and comprises three owned pending applications:

non-provisional application, one PCT appli cation , and one Taiwanese application .

We have no issued patents related to FTX-6058 or our SCD or ß-thalassemia programs.

In order to continue to pursue protection based on the PCT application, we will need to nationalize this application into correspondi ng foreign applications prior to the expiration deadline of the PCT application.

Even then, as highlighted above, patents may never issue from our patent applications, or the scope of any patent may not be sufficient to provide a competitive advantage.

Wit h respect to losmapimod, the patents to losmapimod licensed from GSK as a composition of matter and pharmaceutical composition are expected to expire on February 10, 2023.

Currently, our patent portfolio related to FTX-6058 includes one issued U.S.

patent, one U.S.

non-provisional application , two PCT applications , and two U.S.

provisional applications .

In order to continue to pursue protection based on the PCT applications, we will need to nationalize these applications into corresponding foreign applications prior to the expiration deadline of the PCT applications.

Even then, further patents may never issue from our patent applications, or the scope of any patent may not be sufficient to provide a competitive advantage.

With respect to losmapimod, the patents to losmapimod licensed from GSK as a composition of matter and pharmaceutical composition are expected to expire on February 10, 2023.

We own one patent covering the use of losmapimod for the treatment of patients with FSHD and we own one patent covering the use of other clinical-stage p38 inhibitors for the treatment of patients with FSHD.

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If the breadth or strength of protection provided by our patents and patent applications is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.

For example, while we believe that the specific and generic claims contained in our U.S.

patent provide protection for the method of using losmapimod for the treatment of FSHD and while we also believe that the specific and generic claims contained in our issued and pending U.S.

non-provisional and provisional applications provide protection for the pharmaceutical compositions and methods of use for FTX-6058, third parties may nevertheless challenge such claims.

If any such claims are invalidated or rendered unenforceable for any reason, we will lose valuable intellectual property rights and our ability to prevent others from competing with us would be impaired.

Additionally, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance.

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For example, the composition of matter patents covering losmapimod, licensed from GSK, are expected to expire on February 10, 2023.

As soon as the patents covering the composition of matter expire on February 10, 2023, or are no longer in-force, the GSK-licensed patents will no longer be a barrier to entry for any new uses not covered by our other patents and patent applications.

Given the near term expiration date of these patents, and the fact that safe harbor protections in many jurisdictions permit third parties to engage in development, including clinical trials, these patents may not provide us with any meaningful competitive advantage.

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If we are unable to obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights we have, we may be required to expend significant time and resources to redesign our technology, product candidates, or the methods for manufacturing them or to develop or license replacement technology, all of which may not be feasible on a technical or commercial basis.

If we are una ble to do so, we may be unable to develop or commercialize the affected technology and product candidates, which could harm our business, financial condition, results of operations and prospects significantly.

If we are unable to do so, we may be unable to develop or commercialize the affected technology and product candidates, which could harm our business, financial condition, results of operations and prospects significantly.

Additionally, if we fail to comply with our obligations under license agreements, our counterparties may have the right to terminate these agreements, in which event we might not be able to develop, manufacture or market, or may be forced to cease developing, manufacturing or marketing, any product that is covered by these agreements or may face other penalties under such agreements.

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There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments.

If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our com mon stock.

If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock.

Third parties may initiate legal proceedings alleging that we are infringing, misappropriating or otherwise violating their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

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Claims that we have misappropriated the confidential information or trade secrets of third parties could have a similar material adverse effect on our business, financial condition, results of operations and prospects.

Intellectual property litigation or other legal pr oceedings relating to intellectual property could cause us to spend substantial resources and distract our personnel from their normal responsibilities.

Intellectual property litigation or other legal proceedings relating to intellectual property could cause us to spend substantial resources and distract our personnel from their normal responsibilities.

Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities.

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the scope of rights granted under the license agreement and other interpretation related issues;

the ex tent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;

the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;

the sublicensing of patent and other rights under our collaborative development relationships;

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Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties.

In addition, many countries limit the enforceability of patents against government agencies or government contr actors.

In addition, many countries limit the enforceability of patents against government agencies or government contractors.

In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent.

If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our busine ss, our competitive position may be impaired, and our business, financial condition, results of operations and prospects may be adversely affected.

If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations and prospects may be adversely affected.

We may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.

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We have not submitted an application for or received marketing approval for any of our product candidates in the United States or in any other jurisdiction.

We have only limited experience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third-party clinical research organizations or other third-party consultants or vendors to assi st us in this process.

Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and effic acy.

Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities.

Our product candidates may not be effective, may be only mod erately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use.

If any of our product candidates receives marketing ap proval, the accompanying label may limit the approved use of our drug, which could limit sales of the product.

Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information, including manufacturing information, to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy.

Our product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use.

If any of our product candidates receives marketing approval, the accompanying label may limit the approved use of our drug, which could limit sales of the product.

The process of obtaining marketing approvals, both in the United States and abroad, is expensive, may take many years, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved.

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Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.

Disruptions at the FDA and other agencies may prolong the time necessary for regulatory submissions to be reviewed and/or new drugs to be approved by necessary government agencies, which would adversely affect our business.

For example, over the last several years, the U.S.

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

If a prolonged government shutdown were to occur, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

The Trump Administration also took several executive actions that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities.

If we experience delays in obtaining approval or if we fail to obtain approval of our product candidates, the commercial prospects for our product candidates may be harmed and our ability to generate revenues will be materially impaired.

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FDARA, among other things, codified the FDA’s pre-existing regulatory interpretation to require that a drug sponsor demonstrate the clinical superiority of an orphan drug that is otherwise the same as a previously approved drug for the same rare disease in order to receive orphan drug exclusivity.

The new legislation reverses prior precedent holding that the Orphan Drug Act unambiguously requires that the FDA recognize the orphan exclusivity period regardless of a showing of clinical superiority.

More recently, under Omnibus legislation signed by President Trump on December 27, 2020, the requirement for a subsequent product to show clinical superiority in order to break the previous product’s orphan drug exclusivity applies to drugs and biologics that received orphan drug designation before enactment of FDARA in 2017, but have not yet been approved or licensed by FDA.

The FDA may further reevaluate the Orphan Drug Act and its regulations and policies.

We do not know if, when or how the FDA may change the orphan drug regulations and policies in the future, and it is uncertain how any changes might affect our business.

Depending on what changes the FDA may make to its orphan drug regulations and policies, our business could be adversely impacted.

A Fast Track designation by the FDA may not lead to a faster development or regulatory review or approval process.

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Furthermore, if we decide to submit an application for accelerated approval or under another expedited regulatory designation, there can be no assurance that such submission or application will be accepted or that any expedited review or approval will be granted on a timely basis, or at all.

Moreover, as noted above, for drugs granted accelerated appr oval, the FDA typically requires post-marketing confirmatory trials to evaluate the anticipated effect on IMM or other clinical benefit.

Moreover, as noted above, for drugs granted accelerated approval, the FDA typically requires post-marketing confirmatory trials to evaluate the anticipated effect on IMM or other clinical benefit.

These confirmatory trials must be completed with due diligence.

We may be required to evaluate additional or different clinical endpoints in these post-marketing confirmatory trials.

These confirmatory trials may require enrollment of more patients than we currently anticipate and will result in additional costs, which may be greater than the estimated costs we currently a nticipate.

The FDA may withdraw approval of a product candidate approved under the accelerated approval pathway if, for example, the trial required to verify the predicted clinical benefit of our product candidate fails to verify such benefit or does not d emonstrate sufficient clinical benefit to justify the risks associated with the drug.

The FDA may withdraw approval of a product candidate approved under the accelerated approval pathway if, for example, the trial required to verify the predicted clinical benefit of our product candidate fails to verify such benefit or does not demonstrate sufficient clinical benefit to justify the risks associated with the drug.

The FDA may also withdraw approval if other evidence demonstrates that our product candidate is not shown to be safe or effective under the conditions of use, we fail to conduct any required post approval trial of our product candidate with due diligence or we disseminate false or misleading promotional materials relating to our product candidate.

A failure to obtain accelerated approval or any other form of expedited deve lopment, review or approval for our product candidates, or withdrawal of a product candidate, would result in a longer time period for commercialization of such product candidate, could increase the cost of development of such product candidate and could h arm our competitive position in the marketplace.

A failure to obtain accelerated approval or any other form of expedited development, review or approval for our product candidates, or withdrawal of a product candidate, would result in a longer time period for commercialization of such product candidate, could increase the cost of development of such product candidate and could harm our competitive position in the marketplace.

Failure to obtain marketing approval in foreign jurisdictions would prevent our product candidates from being marketed abroad.

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We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market.

Since the regulatory framework for pharmaceutical products in the United Kingdom covering quality, safety and efficacy of pharmaceutical product, clinical trials, marketing authorization, commercial sales and distribution of pharmaceutical products is derived from European Union directives and regulations, Brexit could materially impact the regulatory regime that applies to products and with respect to the approval of our product candidates in the United Kingdom or the European Union.

Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, would prevent us from commercializing our product candidates in the United Kingdom and/or the European Union and restrict our ability to generate revenue and achieve and sustain profitability.

If any of these outcomes occur, we may be forced to restrict or delay efforts to seek regulatory approval in the United Kingdom and/or European Union for our product candidates, which could significantly and materially harm our business.

Additionally, we could face heightened risks with respect to seeking marketing approval in the United Kingdom as a result of the recent withdrawal of the United Kingdom from the European Union, commonly referred to as Brexit.

Pursuant to the formal withdrawal arrangements agreed between the United Kingdom and the European Union, the United Kingdom withdrew from the European Union, effective December 31, 2020.

On December 24, 2020, the United Kingdom and European Union entered into a Trade and Cooperation Agreement, which sets out certain procedures for approval and recognition of medical products in each jurisdiction.

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 pharmaceutical products is derived from European Union directives and regulations, Brexit could materially impact the future regulatory regime that applies to products and the approval of product candidates in the United Kingdom.

Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, could prevent us from commercializing any product candidates in the United Kingdom and/or the European Union and restrict our ability to generate revenue and achieve and sustain profitability.

If any of these outcomes occur, we may be forced to restrict or delay efforts to seek regulatory approval in the United Kingdom and/or European Union for any product candidates, which could significantly and materially harm our business.

Any product candidate for which we obtain marketing approval could be subject to post-marketing restrictions or withdrawal from the market and we may be subject to substantial penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products, when and if any of them are approved.

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The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the product, including the adoption and implementation of REMS.

The FDA and other agencies, including the Department of Justice, or the DOJ, closely regulate and monitor the post-approval marketing and promotion of drugs to ensure they are marketed and distributed only for the approved indications and in accordance with t he provisions of the approved labeling.

The FDA and DOJ impose stringent restrictions on manufacturers’ communications regarding off-label use, and if we do not market our products for their approved indications, we may be subject to enforcement action for off-label marketing.

Violations of the Federal Food, Drug and Cosmetic Act, or FDCA, and other statutes, including the False Claims Act, relating to the promotion and advertising of prescription drugs may lead to investigations and enforcement actions all eging violations of federal and state healthcare fraud and abuse laws, as well as state consumer protection laws.

Violations of the Federal Food, Drug and Cosmetic Act, or FDCA, and other statutes, including the False Claims Act, relating to the promotion and advertising of prescription drugs may lead to investigations and enforcement actions alleging violations of federal and state healthcare fraud and abuse laws, as well as state consumer protection laws.

In addition, later discovery of previously unknown adverse events or other problems with our products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may have various consequences, including:

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We, any contract manufacturers we may engage in the future, our future collaborators and their contract manufacturers will also be subject to other regulatory requirements, including submissions of safety and other post-marketing information and reports, registration and listing requirements, requirements regarding the distribution of samples to clinicians, recordkeeping, and costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the product such as the requirement to implement a REMS.

The efforts of the Trump administration to pursue regulatory reform may li mit the FDA’s ability to engage in oversight and implementation activities in the normal course, and that could negatively impact our business.

The Trump administration has taken several executive actions, including the issuance of a number of executive orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications.

For example, on January 30, 2017, President Trump issued an executive order, applicable to all executive agencies, including the FDA, requiring that for each notice of proposed rulemaking or final regulation to be issued in fiscal year 2017, the agency shall identify at least two existing regulations to be repealed, unless prohibited by law.

These requirements are referred to as the “two-for-one” provisions.

This executive order includes a budget neutrality provision that requires the total incremental cost of all new regulations in the 2017 fiscal year, including repealed regulations, to be no greater than zero, except in limited circumstances.

For fiscal years 2018 and beyond, the executive order requires agencies to identify regulations to offset any incremental cost of a new regulation.

In interim guidance issued by the Office of Information and Regulatory Affairs within the Office of Management and on February 2, 2017, the Trump administration indicated that the “two-for-one” provisions may apply not only to agency regulations, but also to significant agency guidance documents.

More recently, on October 9, 2019, President Trump issued another executive order (“Executive Order on Promoting the Rule of Law Through Improved Agency Guidance Documents”).

The order is meant to ensure that agency guidance documents do not establish legally binding requirements and it directs each agency to rescind guidance documents that it determines should no longer be in effect.

In response to the COVID-19 pandemic, the Trump administration has indicated that it will take additional actions to provide regulatory relief.

If these executive actions impose constraints on FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.

Our relationships with healthcare providers, physicians and third-party payors will be subject to applicable anti-kickback, fraud and abuse, false claims, transparency, health information privacy and security, and other healthcare laws and regulations, which, in the event of a violation, could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, administrative burdens and diminished profits and future earnings.

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analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws and transparency statutes, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers.

Some state laws require pharmaceutical companies to comply with the pharmaceutical i ndustry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcar e providers or marketing expenditures.

Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures.

Additionally, some state and local laws require the registration of pharmaceutical sales representatives in the jurisdiction.

State and foreign laws also govern the privacy and security of health information in some c ircumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

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.

Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs.

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There also is the threat of consumer class actions related to these laws and the overall protection of personal data.

Given the breadth and depth of changes in data protection obligations, preparing for and complying with thes e requirements is rigorous and time intensive and requir es significant resources and a review of our technologies, systems and practices, as well as those of any third-party collaborators, service providers, contractors or consultants that process or transfer personal data collected in the European Union.

The G DPR and other changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as healthcare data or other personal information from our clinical trials, could require us to change our business practices and p ut in place additional compliance mechanisms, may interrupt or delay our development, regulatory and commercialization activities and increase our cost of doing business, and could lead to government enforcement actions, private litigation and significant fines and penalties against us and could have a material adverse effect on our business, financial condition or results of operations.

Similarly, failure to comply with federal and state laws regarding privacy and security of personal information could exp ose us to fines and penalties under such laws.

Even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which could ha rm our reputation and our business.

Given the breadth and depth of changes in data protection obligations, preparing for and complying with these requirements is rigorous and time intensive and requires significant resources and a review of our technologies, systems and practices, as well as those of any third-party collaborators, service providers, contractors or consultants that process or transfer personal data collected in the European Union.

The GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as healthcare data or other personal information from our clinical trials, could require us to change our business practices and put in place additional compliance mechanisms, may interrupt or delay our development, regulatory and commercialization activities and increase our cost of doing business, and could lead to government enforcement actions, private litigation and significant fines and penalties against us and could have a material adverse effect on our business, financial condition or results of operations.

Similarly, failure to comply with federal and state laws regarding privacy and security of personal information could expose us to fines and penalties under such laws.

Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain for any products that are approved in the United States or foreign jurisdictions.

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Current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any FDA approved product.

In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or the MMA, changed the way Medicare covers and pays for pharmaceutical products.

The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for physician-administered drugs.

In addition, this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class.

Cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for any approved products.

While the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates.

Therefore, any reduction in reimbursement that results from the MMA may result in a similar reduction in payments from private payors.

If reimbursement of our products is unavailable or limited in scope, our business could be materially harmed.

In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the ACA.

Among the provisions of the ACA of potential importance to our business, including, without limitation, our ability to commercialize and the prices we may obtain for any of our product candidates that are approved for sale, are the following:

an annual, non-deductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs, although this fee would not apply to sales of certain products approved exclusively for orphan indications;

an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;

expansion of healthcare fraud and abuse laws, including the civil False Claims Act and the federal Anti-Kickback Statute, new government investigative powers and enhanced penalties for noncompliance;

a Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% point-of-sale discounts off negotiated prices;

extension of manufacturers’ Medicaid rebate liability;

expansion of eligibility criteria for Medicaid programs;

expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;

requirements to report certain financial arrangements with physicians and teaching hospitals;

a requirement to annually report drug samples that manufacturers and distributors provide to physicians;

a Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted.

These changes include the Budget Control Act of 2011, which, among other things, led to aggregate re ductions to Medicare payments to providers of up to 2% per fiscal year that started in 2013 and, due to subsequent legislative amendments to the statute, will stay in effect through 2029 unless additional congressional action is taken, and the American Tax payer Relief Act of 2012, which, among other things, reduced Medicare payments to several types of providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

These new laws ma y result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any of our product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.

Further, there have been several recent U.S.

congressional inquiries and proposed state and federal legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manuf acturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products.

These changes include the Budget Control Act of 2011, which, among other things, led to aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which will stay in effect through 2030 under the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act.

The CARES Act suspended the 2% Medicare sequester from May 1, 2020 through December 31, 2020.

The American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

These laws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any of our product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.

We expect that these healthcare reforms, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure on the price that we receive for any approved product and/or the level of reimbursement physicians receive for administering any approved product we might bring to market.

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Since the enactment of the ACA, there have been, and continue to be, numerous legal challenges and Congressional actions to repeal and replace provisions of the law.

For example, with enactment of the TCJA, which was signed by President Trump on December 22, 2017, Congress repealed the “individual mandate.” The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, will become effective in 2019.

Additionally, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminates the health insurer tax.

Further, the Bipartisan Budget Act of 2018, among other things, amended the ACA, effective January 1, 2019, to increase from 50 percent to 70 percent the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.”

The Trump administration has also taken executive actions to undermine or delay implementation of the ACA.

For example, President Trump signed two Executive Orders designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA.

One Executive Order directs federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices.

The second Executive Order terminates the cost-sharing subsidies that reimburse insurers under the ACA.

Several state Attorneys General filed suit to stop the Trump administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017.

In addition, the Centers for Medicare & Medicaid Services, or CMS, has recently proposed regulations that would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces.

Further, on June 14, 2018, U.S.

Court of Appeals for the Federal Circuit ruled that the federal government was not required to pay more than $12 billion in ACA risk corridor payments to third-party payors who argued were owed to them.

This decision is under review by the U.S.

Supreme Court during its current term.

The full effects of this gap in reimbursement on third-party payors, the viability of the ACA marketplace, providers, and potentially our business, are not yet known.

On November 30, 2018, CMS announced a proposed rule that would amend the Medicare Advantage and Medicare Part D prescription drug benefit regulations to reduce out of pocket costs for plan enrollees and allow Medicare plans to negotiate lower rates for certain drugs.

Among other things, the proposed rule changes would allow Medicare Advantage plans to use pre authorization (PA) and step therapy (ST) for six protected classes of drugs, with certain exceptions;

permit plans to implement PA and ST in Medicare Part B drugs;

and change the definition of “negotiated prices” as well as add a definition of “price concession” in the regulations.

It is unclear whether these proposed changes will be accepted, and if so, what effect such changes will have on our business.

Litigation and legislation over the ACA are likely to continue, with unpredictable and uncertain results.

Further, on December 14, 2018, a U.S.

District Court judge in the Northern District of Texas ruled that the individual mandate portion of the ACA is an essential and inseverable feature of the ACA, and therefore because the mandate was repealed as part of the TCJA, the remaining provisions of the ACA are invalid as well.

The Trump administration and CMS have both stated that the ruling will have no immediate effect, and on December 30, 2018 the same judge issued an order staying the judgment pending appeal.

The Trump administration thereafter represent ed to the Court of Appeals considering this judgment that it does not oppose the lower court’s ruling.

On July 10, 2019, the Court of Appeals for the Fifth Circuit heard oral argument in this case.

In those arguments, the Trump administration argued in sup port of upholding the lower court decision .

On December 18, 2019, that court affirmed the lower court’s ruling that the individual mandate portion of the ACA is unconstitutional and it remanded the case to the district court for reconsideration of the severability question and additional analysis of the provisions of the ACA.

On January 21, 2020, the U.S.

Supreme Court declined to review this decision on an expedited basis.

On March 2, 2020, that court agreed to hear this case.

On June 25, 2020, the Trump administration and a coalition of 18 states a sked the court to strike down the entirety of the ACA.

Oral argument in this case is scheduled for November 10, 2020.

For example, with enactment of the TCJA in 2017, Congress repealed the “individual mandate.” The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, became effective in 2019.

On November 10, 2020, the Supreme Court heard oral arguments as to whether the individual mandate portion of the ACA is an essential and inseverable feature of the ACA, and therefore because the mandate was repealed as part of the TCJA, the remaining provisions of the ACA are invalid as well.

On February 10, 2021, the Biden Administration withdrew the federal government’s support for overturning the ACA.

A ruling by the Supreme Court is expected sometime this year.

The Trump Administration also took executive actions to undermine or delay implementation of the ACA, including directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices.

On January 28, 2021, however, President Biden issued a new Executive Order which directs federal agencies to reconsider rules and other policies that limit Americans’ access to health care, and consider actions that will protect and strengthen that access.

Under this Executive Order, federal agencies are directed to re-examine:

policies that undermine protections for people with pre-existing conditions, including complications related to COVID-19;

demonstrations and waivers under Medicaid and the ACA that may reduce coverage or undermine the programs, including work requirements;

policies that undermine the Health Insurance Marketplace or other markets for health insurance;

policies that make it more difficult to enroll in Medicaid and the ACA;

and policies that reduce affordability of coverage or financial assistance, including for dependents.

This Executive Order also directs the U.S.

Department of Health and Human Services to create a special enrollment period for the Health Insurance Marketplace in response to the COVID-19 pandemic.

We cannot predict how federal agencies will respond to such Executive Orders.

Litigation and legislation over the ACA are likely to continue, with unpredictable and uncertain results.

The costs of prescription pharmaceuticals have also been the subject of considerable discussion in the United States, and members of Congress and the Trump administration have previously stated that they will address such costs through new legislative and administrative measures.

The prices of prescription pharmaceuticals have also been the subject of considerable discussion in the United States.

To date, there have been several recent U.S.

congressional inquiries and proposed and enacted state and federal legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products.

At the federal level, the Trump administration has pressed for further drug price control measures that could be enacted during the annual budget process or in other future legislation.

While any proposed measures will require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs.

At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological 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.

Specifically, there have been several recent U.S.

congressional inquiries and proposed federal and proposed and enacted state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products.

At the federal level, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs.

For example, on May 11, 2018, the Trump administration issued a plan to lower drug prices.

Under this blueprint for action, the Trump administration indicated that the Department of Health and Human Services, or HHS, will:

take steps to end the gaming of regulatory and patent processes by drug makers to unfairly protect monopolies;

advance biosimilars and generics to boost price competition;

evaluate the inclusion of prices in drug makers’ advertisements to enhance price competition;

speed access to and lower the cost of new drugs by clarifying policies for sharing information between insurers and drug makers;

avoid excessive pricing by relying more on value-based pricing by expanding outcome-based payments in Medicare and Medicaid;

work to give Part D plan sponsors more negotiation power with drug makers;

examine which Medicare Part B drugs could be negotiated for a lower price by Part D plans, and improving the design of the Part B Competitive Acquisition Program;

update Medicare’s drug-pricing dashboard to increase transparency;

prohibit Part D contracts that include “gag rules” that prevent pharmacists from informing patients when they could pay less out-of-pocket by not using insurance;

and require that Part D plan members be provided with an annual statement of plan payments, out-of-pocket spending, and drug price increases.

Finally, the Trump administration’s budget proposal for fiscal year 2021 includes a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs.

More recently, on July 24, 2020, President Trump issued four executive orders that are intended to lower the costs of prescription drug products.

The first order would require all federally qualified health centers, or FQHCs, to pass on to patients the discounts the health centers receive on insulin and epinephrine through Medicare's 340B Drug Discount Program.

The second order would establish an international pricing index that would set the price Medicare Part B pays for the costliest medications covered under the program to the lowest price in other economically advanced countries.

The third order is intended to reduce the costs of drugs by supporting the safe importation of prescription drugs.

Specifically, the order calls upon HHS to facilitate grants to individuals of waivers of the prohibition of importation of prescription drugs that would allow patients to import FDA approved drug products from abroad, so long as doing so would result in lower costs.

In addition, the order would allow wholesalers and pharmacies to re-import both biological drugs and insulin that were originally manufactured in the United States and then exported for international sale.

This action preceded the finalization of a rulemaking on September 24, 2020 that allows states or certain other non-federal government entities to submit importation program proposals to the FDA for review and approval.

Applicants would be required to demonstrate that their importation plans pose no additional risk to public health and safety and will result in significant cost savings for consumers.

At the same time, the FDA issued draft guidance that would allow manufacturers to import their own FDA-approved drugs that are authorized for sale in other countries (multi-market approved products).

Th e fourth order would end drug rebates used by health plan sponsors, pharmacies or pharmacy benefit managers, or PBMs, in operating the Medicare Part D program.

Specifically, the order directs HHS to exclude from safe harbor protections under the federal anti-kickback statute retroactive price reductions that are not applied at the p oint-of-sale.

Instead, the order requires HHS to establish new safe harbors that would allow health plan sponsors, pharmacies, and PBMs to pass on those discounts to consumers at point-of-sale in order to lower the patient's out-of-pocket costs and permit the use of certain bona fide PBM service fees.

Each of these orders directs the federal government to implement the initiatives outlined in the orders, meaning they will not have immediate effects.

Following issuance of these orders, President Trump issued a fifth executive order which instructs the federal government to develop a list of “essential” medicines and then buy them and other medical supplies from U.S.

manufacturers instead of from companies around the world, including especially China.

The order is meant reduce regulatory barriers to domestic pharmaceutical manufacturing and catalyze manufacturing technologies needed to keep drug prices low and the production of drug products in the United States.

congressional inquiries, as well as proposed and enacted state and federal legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products.

To those ends, President Trump issued several executive orders intended to lower the costs of prescription drug products.

Certain of these orders are reflected in recently promulgated regulations, including an interim final rule implementing President Trump’s most favored nation model, but such final rule is currently subject to a nationwide preliminary injunction.

It remains to be seen whether these orders and resulting regulations will remain in force during the Biden Administration.

Further, on September 24, 2020, the Trump Administration finalized a rulemaking allowing states or certain other non-federal government entities to submit importation program proposals to the FDA for review and approval.

Applicants are required to demonstrate that their importation plans pose no additional risk to public health and safety and will result in significant cost savings for consumers.

The FDA has issued draft guidance that would allow manufacturers to import their own FDA-approved drugs that are authorized for sale in other countries (multi-market approved products).

At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological 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.

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We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.

Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products.

We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be.

Increased scrutiny by the U.S.

Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

Governments outside of the United States tend to impose strict price controls, which may adversely affect our revenues, if any.

In some countries, particularly the countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control.

In countries outside of the United States, particularly the countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control.

In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product.

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Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

Further, with respect to the operations of our current and any future third-party contract manufacturers, it is possible that if they fail to operate in compliance with applicable environmental, health and safety laws and regulations or properly dispose of wastes associated wit h our products, we could be held liable for any resulting damages, suffer reputational harm or experience a disruption in the manufacture and supply of our product candidates or products.

In addition, our supply chain may be adversely impacted if any of ou r third-party contract manufacturers become subject to injunctions or other sanctions as a result of their non-compliance with environmental, health and safety laws and regulations.

Further, with respect to the operations of our current and any future third-party contract manufacturers, it is possible that if they fail to operate in compliance with applicable environmental, health and safety laws and regulations or properly dispose of wastes associated with our products, we could be held liable for any resulting damages, suffer reputational harm or experience a disruption in the manufacture and supply of our product candidates or products.

In addition, our supply chain may be adversely impacted if any of our third-party contract manufacturers become subject to injunctions or other sanctions as a result of their non-compliance with environmental, health and safety laws and regulations.

We are subject to anti-corruption laws, as well as export control laws, customs laws, sanctions laws and other laws governing our operations.

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We are exposed to the risk of fraud or other misconduct by our employees, independent contractors, consultants and vendors.

Misconduct by these partners could include intentional failures to comply with FDA regulations or similar regulations of comparable foreign regulatory authorities, provide accurate information to the FDA or comparable foreign regulatory authorities, comply with manufacturing standards, comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable foreign regulatory authorities, report financial information or data accurately or

disclose unauthorized activities to us.

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

T his could include violations of HIPAA, other U.S.

This could include violations of HIPAA, other U.S.

federal and state law, and requirements of non-U.S.

jurisdictions, including the European Union Data Protection Directive.

We are also exposed to risks in connection with any insider trading violations by e mployees or others affiliated with us.

It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in prote cting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws, standards, regulations, guidance or codes of conduct.

If any such actions are instituted against us, and we are not successfu l in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions.

We are also exposed to risks in connection with any insider trading violations by employees or others affiliated with us.

It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws, standards, regulations, guidance or codes of conduct.

If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions.

Our internal computer systems, or those of our collaborators or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs.

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Recruiting and retaining qualified scientific, clinical, manufacturing, accounting, legal and sales and marketing personnel will also be critical to our success.

We have had recent executive transitions, including of our chief executive officer and chief scientific officer.

We cannot predict the likelihood, timing or effect of future transitions among our executive leadership.

The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy.

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If we are unable to continue to attract and retain high quality personnel, our ability to pursue our growth strategy will be limited.

We expect to expand our development and regulatory capabilities and potentially implement sales, marketing and distribution capabilities, and as a result, we may encounter difficulties in m anaging our growth, which could disrupt our operations.

We expect to expand our development and regulatory capabilities and potentially implement sales, marketing and distribution capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

We expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of drug development, clinical, regulatory affairs and, if any of our product candidates receives marketing approval, sales, marketing and distribution.

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Our executive officers, directors and principal stockholders, if they choose to act together, have the ability to control or significantly influence all matters submitted to stockholders for approval.

As of November 4, 2020, our executive officers and directors and our stockholders who owned more than 5% of our outstanding common stock in the aggregate beneficially owned shares representing approximately 63.4% of our capital stock.

As of April 29, 2021, our executive officers and directors and our stockholders who owned more than 5% of our outstanding common stock in the aggregate beneficially owned shares representing approximately 46.9% of our capital stock.

As a result, if these stockholders were to choose to act together, they would be able to control or significantly influence all matters submitted to our stockholders for approval, as well as our management and affairs.

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limit who may call stockholder meetings;

authorize our board of directors to iss ue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors;

authorize our board of directors to issue preferred stock without stockholder approval, which could be used to institute a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively preventing acquisitions that have not been approved by our board of directors;

require the approval of the holders of at least 75% of the votes that all our stockholders would be entitled to cast to amend or repeal specified provisions of our certificate of incorporation or bylaws.

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Sales of a substantial number of shares of our common stock in the public market, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.

Persons who were our stockholders prior to our IPO continue to hold a substantial number of shares of our common stock.

Persons who were our stockholders prior to our initial public offering, or IPO, continue to hold a substantial number of shares of our common stock.

If such persons sell, or indicate an intention to sell, substantial amounts of our common stock in the public market, the trading price of our common stock could decline.

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This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we will be required to furnish a report by our management on our internal control over financial reporting beginning with our Annual Report on Form 10-K for the year ending December 31, 2020.

However, while we remain an EGC, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we are required to furnish a report by our management on our internal control over financial reporting.

However, while we remain an EGC or a smaller reporting company with less than $100 million in revenue, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.

To achieve compliance with Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging.

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As a result, capital appreciation, if any, of our common stock will be our stockholders’ sole source of gain for the foreseeable future.

Our certificate of incorporation designates the state courts in the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be i nitiated by our stockholders, which could discourage lawsuits against the company and our directors, officers and employees.

Our certificate of incorporation designates the state courts in the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could discourage lawsuits against the company and our directors, officers and employees.

Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware does not have jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or stockholders to our company or our stockholders, (3) any action asserting a claim arising pursuant to any provision of the DGCL or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (4) any action asserting a claim arising pursuant to any provision of our certificate of incorporation or bylaws (in each case, as they may be amended from time to time) or governed by the internal affairs doctrine.

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

What changed 10-Q

Item 1A. Risk Factors