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Item 1. Business

2023-02-28 compared with 2022-02-28 · 783 added, 88 removed, 113 unchanged (89% of the section changed)

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or “we”

and other similar pronouns) is a company with a portfolio of royalties and other healthcare assets.

Our royalty portfolio contains respiratory assets partnered with Glaxo Group Limited (“GSK”), including RELVAR ® /BREO ® ELLIPTA ® (fluticasone furoate/ vilanterol, “FF/VI”), ANORO ® ELLIPTA ® (umeclidinium bromide/ vilanterol, “UMEC/VI”) and TRELEGY ® ELLIPTA ® (the combination FF/UMEC/VI).

and other similar pronouns) is a diversified holding company with a portfolio of royalties and other healthcare assets.

Our royalty portfolio contains respiratory assets partnered with Glaxo Group Limited (“GSK”), including RELVAR ® /BREO ® ELLIPTA ® (fluticasone furoate/vilanterol, “FF/VI”) and ANORO ® ELLIPTA ® (umeclidinium bromide/vilanterol, “UMEC/VI”).

Under the Long-Acting Beta2 Agonist (“LABA”) Collaboration Agreement, Innoviva is entitled to receive royalties from GSK on sales of RELVAR ® /BREO ® ELLIPTA ® as follows:

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and royalties from the sales of ANORO ® ELLIPTA ® , which tier upward at a range from 6.5% to 10%.

Innoviva is also entitled to 15% of royalty payments made by GSK under its agreements originally entered into with us, and since assigned to Theravance Respiratory Company, LLC (“TRC”), including TRELEGY ® ELLIPTA ® and any other product or combination of products that may be discovered or developed in the future under the LABA Collaboration Agreement and the Strategic Alliance Agreement with GSK (referred to herein as the “GSK Agreements”), which have been assigned to TRC other than RELVAR ® /BREO ® ELLIPTA ® and ANORO ® ELLIPTA ® .

Innoviva was also entitled to 15% of royalty payments made by GSK under its agreements originally entered into with us, and since assigned to Theravance Respiratory Company, LLC (“TRC”), including TRELEGY ® ELLIPTA ® and any other product or combination of products that may be discovered or developed in the future under the LABA Collaboration Agreement and the Strategic Alliance Agreement with GSK (referred to herein as the “GSK Agreements”), which were assigned to TRC other than RELVAR ® /BREO ® ELLIPTA ® and ANORO ® ELLIPTA ® .

We sold our 15% ownership interest in TRC on July 20, 2022, and are no longer entitled to receive royalties on sales of TRELEGY ® ELLIPTA ® products.

We expanded our portfolio of royalties and innovative healthcare assets through the acquisition of Entasis Therapeutics Holdings Inc.

(“Entasis”) on July 11, 2022 and the acquisition of La Jolla Pharmaceutical Company (“La Jolla”) on August 22, 2022.

Our commercial and marketed products include GIAPREZA ® (angiotensin II), approved in the United States (“U.S.”) to increase blood pressure in adults with septic or other distributive shock, and XERAVA ® (eravacycline) approved in the U.S.

for the treatment of complicated intra-abdominal infections in adults.

Our development pipeline includes medicines for the treatment of bacterial infections, such as our lead asset sulbactam-durlobactam (“SUL-DUR”).

Our headquarters are located at 1350 Old Bayshore Highway, Suite 400, Burlingame, CA 94010.

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Our corporate strategy is currently focused on increasing stockholder value by, among other things, maximizing the potential value of our respiratory assets partnered with GSK, optimizing our operations and augmenting capital allocation.

We continue to diversify our primary royalty management business through actively pursuing opportunistic acquisitions of promising companies and assets in the healthcare industry and enhancing the returns on our capital.

We continue to diversify our royalty management business through actively pursuing opportunistic acquisitions of promising companies and assets in the healthcare industry and enhancing the returns on our capital.

In particular, our recent acquisitions of Entasis and La Jolla created a robust hospital and infectious disease platform.

Our Royalty Product Portfolio

Our Relationship with GSK

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In November 2002, we entered into our LABA Collaboration Agreement with GSK to develop and commercialize once‑daily products for the treatment of chronic obstructive pulmonary disease (“COPD”) and asthma.

The collaboration has developed three combination products:

The collaboration has developed three combination products, two of which we still retain rights in.

Those two are as follows:

RELVAR ® /BREO ® ELLIPTA ® (“FF/VI”) (BREO ® ELLIPTA ® is the proprietary name in the U.S.

and Canada and RELVAR ® ELLIPTA ® is the proprietary name outside the U.S.

and Canada), a once-daily combination medicine consisting of a LABA, vilanterol (“VI”), and an inhaled corticosteroid (“ICS”), fluticasone furoate (“FF”),

ANORO ® ELLIPTA ® (“UMEC/VI”), a once-daily medicine combining a long-acting muscarinic antagonist (“LAMA”), umeclidinium bromide (“UMEC”), with a LABA, VI, and

TRELEGY ® ELLIPTA ® (the combination FF/UMEC/VI), a once-daily combination medicine consisting of an ICS, LAMA and LABA.

and Canada), a once-daily combination medicine consisting of a LABA, vilanterol (“VI”), and an inhaled corticosteroid (“ICS”), fluticasone furoate (“FF”), and,

ANORO ® ELLIPTA ® (“UMEC/VI”), a once-daily medicine combining a long-acting muscarinic antagonist (“LAMA”), umeclidinium bromide (“UMEC”), with a LABA, VI.

As a result of the launch and approval of RELVAR ® /BREO ® ELLIPTA ® and ANORO ® ELLIPTA ® in the U.S., Japan and Europe, in accordance with the LABA Collaboration Agreement, we paid milestone fees to GSK totaling $220.0 million during the year ended December 31, 2014.

The milestone fees paid to GSK were recognized as capitalized fees paid to a related party, which are being amortized over their estimated useful lives commencing upon the commercial launch of the products.

2004 Strategic Alliance

In March 2004, we entered into the Strategic Alliance Agreement with GSK where GSK received an option to license exclusive development and commercialization rights to product candidates from certain of our discovery programs on predetermined terms and on an exclusive, worldwide basis.

In 2005, GSK licensed our Bifunctional Muscarinic Antagonist-Beta2 Agonist ("MABA") program for the treatment of COPD, and in October 2011, we and GSK expanded the MABA program by adding six additional Innoviva- discovered preclinical MABA compounds (the “Additional MABAs”).

The development program was funded in full by GSK.

As a result of the transactions effected by the spin-off of Theravance Biopharma in June 2014 (the “Spin-Off”), the Strategic Alliance Agreement was assigned to TRC, which is entitled to receive any contingent payments and royalties payable by GSK from sales of products that may be developed under the Strategic Alliance Agreement, such as MABA, and MABA/FF.

In June 2020, GSK terminated the MABA program and agreed to pay a $10.0 million termination fee to TRC.

This fee was recognized as revenue from collaborative arrangements with a related party on our consolidated statements of income for the year ended December 31, 2020.

Recent Highlights

GSK Net Sales:

o Fourth quarter 2021 net sales of RELVAR ® /BREO ® ELLIPTA ® by GSK were $384.4 million, up 3% from $372.8 million in the fourth quarter of 2020, with $158.2 million in net sales from the U.S.

market and $226.2 million from non-U.S.

o Fourth quarter 2021 net sales of ANORO ® ELLIPTA ® by GSK were $166.7 million, down 17% from $200.9 million in the fourth quarter of 2020, with $85.3 million net sales from the U.S.

market and $81.4 million from non-U.S.

o Fourth quarter 2021 net sales of TRELEGY ® ELLIPTA ® by GSK were $480.2 million, up 53% from $313.6 million in the fourth quarter of 2020, with $337.1 million in net sales from the U.S.

market and $143.1 million in net sales from non-U.S.

Strategic Investments:

o During the fourth quarter of 2021, we invested an additional $4.0 million in Armata Pharmaceuticals, Inc.

(“Armata”) to acquire 1.2 million shares of common stock at $3.30 per share.

As of December 31, 2021, our total ownership of Armata’s outstanding stock (without giving effect to our warrants) was approximately 60%.

o In February 2022, we entered into an agreement with Armata, pursuant to which we will invest, subject to certain closing conditions, an additional $45.0 million to acquire 9.0 million shares of Armata common stock and warrants to purchase up to 4.5 million shares of Armata common stock with an exercise price of $5.00 per share in two tranches.

At the closing of the first tranche in February 2022, we acquired approximately 3.6 million shares of Armata common stock and 1.8 million warrants for an aggregate purchase price of $18.1 million.

Upon closing of the second tranche, we expect to own approximately 70% of Armata’s outstanding stock (without giving effect to our warrants).

In addition, on February 1, 2022, we submitted to Entasis Therapeutics Holdings, Inc.

ETTX) ("Entasis") a non-binding proposal to acquire all of the outstanding stock of Entasis not owned by us for all cash consideration.

The proposal is non-binding and is subject to a number of conditions, including the receipt of requisite board and shareholder approvals, confirmatory diligence and negotiation and execution of a definitive merger agreement.

There can be no assurance that a definitive agreement with respect to the transaction will be executed, or if executed, whether the transaction will be consummated.

There is also no certainty as to the timetable for execution of a definitive agreement, if any.

Any failure by us to complete this acquisition on a timely basis, or at all, or to realize the benefits that we expect as a result of the acquisition, could have an adverse effect on our business.

Manufacturing

Manufacturing of RELVAR ® /BREO ® ELLIPTA ® (FF/VI), ANORO ® ELLIPTA ® (UMEC/VI) and TRELEGY ® ELLIPTA ® (the combination FF/UMEC/VI) is performed by GSK.

Government Regulation

The development and commercialization of products and product candidates pursuant to the GSK Agreements, or by entities that we have invested in or acquired, are subject to extensive regulation by governmental authorities in the United States and other countries.

Before marketing in the United States, any medicine must undergo rigorous preclinical studies and clinical studies and an extensive regulatory approval process implemented by the U.S.

Food and Drug Administration ("FDA").

Outside the United States, the ability to market a product depends upon receiving a marketing authorization from the appropriate regulatory authorities.

The requirements governing the conduct of clinical studies, marketing authorization, pricing and reimbursement vary widely from country to country.

In any country, the commercialization of medicines is permitted only if the appropriate regulatory authority is satisfied that our collaborative partner has presented adequate evidence of the safety, quality and efficacy of such medicines.

Once a product is approved, the FDA may withdraw the product approval if compliance with pre‑

and post‑

marketing regulatory standards is not maintained or if safety or quality issues are identified after the product reaches the marketplace.

In addition, the FDA may require post marketing studies, referred to as Phase 4 studies, to monitor the effect of approved products, and may limit further marketing of the product based on the results of these post‑marketing studies.

The FDA has broad post‑market regulatory and enforcement powers, including the ability to suspend or delay issuance of approvals, seize products, withdraw approvals, enjoin violations, institute criminal investigations, and refer cases to the U.S.

Department of Justice for prosecution or an injunction or other civil remedies.

If regulatory approval for a medicine is obtained, commercial marketing of the product will be limited to those diseases and conditions for which the medicine is effective, as demonstrated through clinical studies and included in the medicine’s labeling.

Even if this regulatory approval is obtained, the manufacturer and the approved product are subject to continuing regulation by the FDA, including, among other things, monitoring and record-keeping requirements, requirements to report adverse experiences and comply with promotion and advertising requirements, which include restrictions on promoting drugs for unapproved uses or patient populations.

A marketed medicine, its manufacturer and its manufacturing facilities are subject to continual review and periodic inspections by the FDA.

The FDA ensures the quality of approved medicines by carefully monitoring manufacturers’

compliance with its current good manufacturing practice (“cGMP”) regulations.

The cGMP regulations for drugs contain minimum requirements for the methods, facilities, and controls used in manufacturing, processing, and packaging of a medicine.

The regulations are intended to make sure that a medicine is safe for use, and that it has the ingredients and strength it claims to have.

Discovery of previously unknown problems with a medicine, manufacturer or facility or noncompliance with regulatory requirements may result in restrictions on the medicine or manufacturer, including revisions to the approved labeling to add new safety information, imposition of post-market studies or clinical studies to assess new safety risks, refusal of the FDA to approve pending applications or supplements to approved applications, imposition of distribution, marketing or manufacturing restrictions, costly recalls or withdrawal of the medicine from the market, warning letters, product seizure, injunction and the imposition of civil or criminal penalties.

We and our collaborative partner are also subject to various laws and regulations regarding laboratory practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances in connection with the development and commercialization of products and product candidates.

In each of these areas, as above, the FDA and other regulatory authorities have broad regulatory and enforcement powers, including the ability to suspend or delay issuance of approvals, seize products, withdraw approvals, enjoin violations, and institute criminal prosecution, any one or more of which could have a material adverse effect upon our business, financial condition and results of operations.

Outside the United States, the ability to market products will also depend on receiving marketing authorizations from the appropriate regulatory authorities.

Risks similar to those associated with FDA approval and continuing review described above exist with the regulatory approval processes in other countries.

Patents and Proprietary Rights

We and our collaborative partner will be able to protect our partnered technology from unauthorized use by third parties only to the extent that such technology is covered by valid and enforceable patents or is effectively maintained as trade secrets.

Our success depends in part on obtaining patent protection for products and product candidates within our portfolio, including the products partnered with GSK.

Accordingly, patents and other proprietary rights are essential elements of our business.

Our Strategic Partnership with Sarissa Capital

Strategic Advisory Agreement

On December 11, 2020, we entered into a Strategic Advisory Agreement (the “Services Agreement”) with Sarissa Capital Management LP (“Sarissa Capital”), pursuant to which Sarissa Capital provides a variety of strategic services to us in order to assist us in the development and execution of our acquisition strategy intended to diversify our assets and the potential sources of revenue.

Sarissa Capital is considered to be a related party due to its investment in Innoviva and its representation on our Board of Directors.

Partnership Agreement

On December 11, 2020, Innoviva Strategic Partners LLC, our wholly owned subsidiary (“Strategic Partners”), entered into a subscription agreement and an Amended and Restated Limited Partnership Agreement (the “Partnership Agreement”) pursuant to which Strategic Partners became a limited partner of ISP Fund LP (the “Partnership”).

The general partner of the Partnership is an affiliate of Sarissa Capital and, pursuant to an investment management agreement, Sarissa Capital acts as the investment adviser to the Partnership.

Strategic Partners made a $300 million initial contribution to the Partnership.

The Partnership was formed for the purposes of investing in equity securities in the healthcare, pharmaceutical and biotechnology industries.

In May 2021, Strategic Partners received a distribution of $110.0 million from the Partnership to provide funding to us for a strategic repurchase of shares held by GSK.

Pursuant to the letter agreement entered into between Strategic Partners, the Partnership, and Sarissa Capital Fund GP LP on May 20, 2021, Strategic Partners agreed to make additional capital contributions to the Partnership in an aggregate amount equal to the amount of the May 2021 distribution prior to March 31, 2022.

We anticipate that RELVAR ® /BREO ® ELLIPTA ® (FF/VI), ANORO ® ELLIPTA ® (UMEC/VI) and TRELEGY ® ELLIPTA ® (the combination FF/UMEC/VI) will compete with a number of approved bronchodilator drugs alone or in combination, including each other and drug candidates under development that are designed to treat asthma and COPD.

The milestone fees paid to GSK were recognized as capitalized fees paid, which are being amortized over their estimated useful lives commencing upon the commercial launch of the products.

We anticipate that RELVAR ® /BREO ® ELLIPTA ® (FF/VI) and ANORO ® ELLIPTA ® (UMEC/VI) will compete with a number of approved bronchodilator drugs alone or in combination, including each other and drug candidates under development that are designed to treat asthma and COPD.

These include but are not limited to:

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it is indicated for the add-on maintenance treatment of adult and pediatric patients aged 12 years and older with severe asthma.

In addition, several firms are developing new formulations of Advair/Seretide (salmeterol /fluticasone propionate) and Symbicort (formoterol fumerate/budesonide) which may be marketed as generics or branded generics relative to the existing products from GSK and AstraZeneca, respectively.

In addition, several firms have been developing new formulations of Advair/Seretide (salmeterol /fluticasone propionate) and Symbicort (formoterol fumerate/budesonide) which may be marketed as generics or branded generics relative to the existing products from GSK and AstraZeneca, respectively.

All of these efforts represent potential competition for any of our partnered products.

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In August 2021, Lupin launched Luforbec ® , a branded generic alternative to Foster, in select European markets.

Boehringer Ingelheim is expected to lose patent protection for Spiriva ® in 2022 which could lead to increased competition in the triple therapy space.

In general, these manufacturers are required to conduct a number of clinical efficacy, pharmacokinetic and device studies to demonstrate equivalence to Advair, per the FDA’s September 2013 Draft Guidance Document.

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In addition, in April 2016, the FDA issued a draft guidance document covering Fluticasone Furoate/Vilanterol Trifenatate (FF/VI), the active ingredients used in RELVAR ® /BREO ® ELLIPTA ® .

Human Capital Resources

As of December 31, 2021, we had five employees.

None of our employees are represented by a labor union.

We consider our employee relations to be good.

Our human capital objectives are to attract, recruit and retain top talent to manage the royalty assets with our partner, GSK, and optimize our operations and capital allocation.

To support these objectives, our reward programs include equity incentive plans, bonus plan, competitive benefits and flexible working arrangements.

Our Integrated Hospital / Infectious Disease Business

Commercial and Marketed Products

The following table summarizes our commercial and marketed products:

and European approval

GIAPREZA is a vasoconstrictor to increase blood pressure in adults with septic or other distributive shock

(3) European Union:

GIAPREZA is indicated for the treatment of refractory hypotension in adults with septic or other distributive shock who remain hypotensive despite adequate volume restitution and application of catecholamines and other available vasopressor therapies

XERAVA is a tetracycline class antibacterial indicated for the treatment of complicated intra-abdominal infections (“cIAI”) in patients 18 years of age and older

(5) European Union:

XERAVA is indicated for the treatment of cIAI in adults

GIAPREZA ® (angiotensin II)

GIAPREZA ® (angiotensin II) injection is approved by the U.S.

FDA as a vasoconstrictor indicated to increase blood pressure in adults with septic or other distributive shock.

GIAPREZA is approved by the European Commission (“EC”) and by the Great Britain Medicines and Health Care Products Regulatory Agency (“MHRA”) for the treatment of refractory hypotension in adults with septic or other distributive shock who remain hypotensive despite adequate volume restitution and application of catecholamines and other available vasopressor therapies.

GIAPREZA mimics the body’s endogenous angiotensin II peptide, which is central to the renin-angiotensin-aldosterone system (“RAAS”), which in turn regulates blood pressure.

GIAPREZA is marketed in the U.S.

by La Jolla and is marketed in Europe and Great Britain by PAION Deutschland GmbH (“PAION”) on behalf of La Jolla.

Angiotensin II for the Treatment of High-Output Shock (“ATHOS-3”)

GIAPREZA was approved by the U.S.

FDA, EC and MHRA based on the results of ATHOS-3, which were published in the New England Journal of Medicine in August 2017.

ATHOS-3 was a multinational, randomized, double-blind, placebo-controlled study in which 321 adults with septic or other distributive shock who remained hypotensive despite fluid and vasopressor therapy received either GIAPREZA or placebo, both in addition to background vasopressor therapy.

The primary endpoint was mean arterial pressure

(“MAP”) response, defined as a MAP of 75 mm Hg or higher or an increase in MAP from baseline of at least 10 mm Hg without an increase in the dose of background vasopressors at Hour 3 (Khanna et al, New England Journal of Medicine 2017;

377:419–430).

ATHOS-3 Study Design (1)

MAP=mean arterial pressure

(1) Khanna et al, New England Journal of Medicine 2017;

377:419–430

(2) Standard-of-care vasopressors included norepinephrine, epinephrine, dopamine and vasopressin

GIAPREZA significantly improved blood pressure response.

Specifically, the primary endpoint was achieved by 70% of GIAPREZA-treated patients compared to 23% of placebo-treated patients (p <0.0001).

Primary Endpoint:

Mean Arterial Pressure Response (1),(2)

(1) GIAPREZA FDA prescribing information

(2) MAP response of 75 mm Hg or higher or an increase from baseline of at least 10 mm Hg at Hour 3 without an increase in the dose of background vasopressors

GIAPREZA provides the ability to rapidly achieve and adjust therapeutic response.

GIAPREZA rapidly increased MAP with a median time to MAP response of approximately 5 minutes.

The plasma half-life of GIAPREZA is less than 1 minute.

In addition, a positive survival trend was observed.

Mortality through Day 28 was 46% on GIAPREZA and 54% on placebo (hazard ratio 0.78;

95% confidence interval 0.57–1.07).

Positive Survival Trend Observed (N=321) (1),(2)

(1) GIAPREZA FDA prescribing information

(2) MAP response of 75 mm Hg or higher or an increase from baseline of at least 10 mm Hg at Hour 3 without an increase in the dose of background vasopressors

The most common adverse reactions that were reported in greater than 10% of GIAPREZA-treated patients were thromboembolic events.

Adverse Reactions Occurring in ≥4% of Patients Treated with GIAPREZA and ≥1.5% More Often than in Placebo-treated Patients (1)

(1) GIAPREZA FDA prescribing information

(2) Including arterial and venous thrombotic events

Percentage of Patients Experiencing ≥1 Adverse Event, ≥1 Serious Adverse Event and Discontinuing Treatment Due to an Adverse Event (1)

(1) Khanna et al, New England Journal of Medicine 2017;

377:419–43

XERAVA ® (eravacycline)

XERAVA ® (eravacycline) for injection is approved by the U.S.

FDA and Singapore Health Sciences Authority (“HSA”) as a tetracycline class antibacterial indicated for the treatment of cIAI due to susceptible microorganisms in patients 18 years of age and older.

XERAVA is approved by the EC, MHRA, and the Hong Kong Department of Health (“DoH”) for the treatment of cIAI in adults.

XERAVA is marketed in the U.S.

by our wholly owned subsidiary, Tetraphase Pharmaceuticals, Inc.

(“Tetraphase”), and is marketed in Europe and Great Britain by PAION on behalf of Tetraphase and is marketed in mainland China, Taiwan, Hong Kong, Macau, South Korea, Singapore, the Malaysian Federation, the Kingdom of Thailand, the Republic of Indonesia, the Socialist Republic of Vietnam and the Republic of the Philippines by Everest Medicines Limited (“Everest”).

Everest submitted an NDA in China, which was accepted by the China National Medical Products Administration (“NMPA”) in March 2021.

cIAIs are the second most common source of severe sepsis in the ICU (Brun-Buisson et al, JAMA 1995;

274(12):968–974).

cIAIs are defined as consequences of perforations of the gastrointestinal tract that result in contamination of the peritoneal space (Solomkin et al, Clinical Infectious Diseases 2018;

69(6):921–929).

Investigating Gram-negative Infections Treated with Eravacycline (“IGNITE”)

XERAVA was approved by the U.S.

FDA, HSA, EC, MHRA, and DoH based on the results of IGNITE1 and IGNITE4, which were published in JAMA Surgery in March 2017 and Clinical Infectious Diseases in December 2018, respectively.

IGNITE1 was a multinational, randomized, double-blind, active-controlled study in 538 patients with clinical evidence of cIAIs requiring urgent surgical or percutaneous intervention who received either XERAVA or ertapenem.

The primary endpoint was clinical cure, defined as complete resolution or significant improvement of signs or symptoms of the index infection, at the test of cure (“TOC”) visit.

The TOC visit was conducted 25 to 31 calendar days after the first dose of the study drug was administered.

IGNITE4 was a multinational, randomized, double-blind, active controlled study in 499 patients with clinical evidence of cIAIs requiring urgent surgical or percutaneous intervention who received either XERAVA or meropenem.

The primary endpoint was clinical cure, defined as complete resolution or significant improvement of signs or symptoms of the index infection, at the TOC visit.

The TOC visit was conducted 25 to 31 calendar days after the first dose of the study drug was administered.

IGNITE1 and IGNITE4 Study Design

(1) Solomkin et al, JAMA Surgery 2017;

152(3):224-232

(2) Solomkin et al, Clinical Infectious Diseases 2018;

(3) TOC visit was conducted 25 to 31 calendar days after the first dose of the study drug was administered

XERAVA demonstrated statistical noninferiority in clinical cure rate in the micro-ITT population, which included all randomized subjects who had baseline bacterial pathogens that caused cIAIs and against at least one of which the investigational drug has in vitro (in a test tube) antibacterial activity (N=846).

Primary Endpoint:

Clinical Cure Rate (1)

(1) XERAVA FDA prescribing information

(2) Noninferiority margins of 10% and 12.5% were used for IGNITE1 and IGNITE4, respectively

Clinical cure rates across patients with gram-negative, gram-positive and anaerobic pathogens, including those with resistant strains, are shown in the following tables.

Clinical Cure Rates at TOC by Selected Baseline Pathogens in the Micro-ITT Population (1)

N=Number of subjects in the micro-ITT Population;

N1=Number of subjects with a specific pathogen;

n=Number of subjects with a clinical cure at the TOC visit

(1) XERAVA FDA prescribing information

(2) Comparators included ertapenem and meropenem for IGNITE1 and IGNITE4, respectively

(3) Includes Streptococcus anginosus, Streptococcus constellatus, and Streptococcus intermedius

(4) Includes Bacteroides caccae, Bacteroides fragilis, Bacteroides ovatus, Bacteroides thetaiotaomicron, Bacteroides uniformis, Bacteroides vulgatus, Clostridium perfringens, and Parabacteroides distasonis

XERAVA Demonstrated High Clinical Cure Rates Against Resistant Pathogens (1)

CEPH-R=cephalosporin-resistant;

ESBL=extended-spectrum β-lactamases;

MDR=multidrug resistance;

N=Number of subjects in the micro-ITT Population;

N1=Number of subjects with a specific pathogen;

n=Number of subjects with a clinical cure at the TOC visit

(1) Ditch et al, 2018 ASM Microbe Annual Meeting

(2) Comparators included ertapenem and meropenem for IGNITE1 and IGNITE4, respectively

(3) Data on file from IGNITE1 and IGNITE4 micro-ITT population

The most common adverse reactions that were reported in XERAVA-treated patients in IGNITE1 and IGNITE4 were infusion site reactions.

Selected Adverse Reactions Reported in ≥1% of Patients Receiving XERAVA (1)

(1) XERAVA FDA prescribing information

(2) Comparators included ertapenem and meropenem for IGNITE1 and IGNITE4, respectively

(3) Infusion site reactions include:

catheter/vessel puncture site pain, infusion site extravasation, infusion site hypoaesthesia, infusion/injection site phlebitis, infusion site thrombosis, injection site/vessel puncture site erythema, phlebitis, phlebitis superficial, thrombophlebitis, and vessel puncture site swelling

Sales and Marketing Organization

We employ an experienced sales and marketing team dedicated to the commercialization of GIAPREZA and XERAVA.

As of December 31, 2022, this team consisted of 35 professionals, including 27 critical care specialists.

During the year ended December 31, 2022, 503 hospitals in the U.S.

purchased GIAPREZA, and 874 hospitals and other healthcare organizations in the U.S.

purchased XERAVA.

Hospitals and other healthcare organizations generally purchase our products through a network of specialty and wholesale distributors.

These specialty and wholesale distributors are considered our

customers for accounting purposes.

We do not believe that the loss of one of these distributors would significantly impact the ability to distribute our products, as we expect that sales volume would be absorbed by the remaining distributors.

Due to the relatively short lead-time required to fill orders for GIAPREZA and XERAVA, backlog is not material to our business.

Catecholamines (primarily norepinephrine), which are available as generics and inexpensive, are typically used first line to treat distributive shock, while vasopressin, including Vasostrict ® (Endo International plc) and vasopressin generic drugs, is typically used second line.

In the randomized, Phase 3 study ATHOS-3, GIAPREZA demonstrated clinical benefit in patients who were not adequately responding to available vasopressors, including catecholamines and vasopressin.

GIAPREZA’s principal competition as a treatment in patients not adequately responding to available vasopressors is the use of these same vasopressors at increased doses.

If we are unable to successfully change treatment practices, the commercial prospects for GIAPREZA will be limited, and our business may suffer.

XERAVA competes with a number of antibiotics that are currently marketed for the treatment of cIAI and other multidrug resistant infections, including:

AVYCAZ (ceftazidime and avibactam, marketed by AbbVie Inc.);

MERREM IV ® (meropenem, marketed by AstraZeneca PLC);

PRIMAXIN ® (imipenem and cilastatin, marketed by Merck & Co., Inc.);

RECARBRIO (imipenem, cilastatin, and relebactam, marketed by Merck & Co., Inc.);

TYGACIL ® (tigecycline, marketed by Pfizer Inc.);

VABOMERE (meropenem and vaborbactam, marketed by Melinta Therapeutics, Inc.);

ZERBAXA ® (ceftolozane and tazobactam, marketed by Merck & Co., Inc.);

ZOSYN ® (piperacillin and tazobactam, marketed by Pfizer Inc.);

and current and future generic versions of marketed antibiotics.

If we are unable to successfully change treatment practices, the commercial prospects for XERAVA will be limited, and our business may suffer.

Regulatory Exclusivity

GIAPREZA and XERAVA are New Chemical Entities (“NCEs”) approved by the U.S.

In the U.S., NCEs approved by the FDA are eligible for market exclusivity under the U.S.

Federal Food, Drug, and Cosmetic Act (“FDCA”), which can prevent the approval of generic versions of the NCE for 5 to 7.5 years from the date of the initial approval of the NCE.

Specifically, the FDCA provides a 5-year period of marketing exclusivity within the U.S.

to the applicant that gains approval of an NDA for an NCE.

A drug is an NCE if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance.

During the exclusivity period, the FDA may not accept for review an Abbreviated New Drug Application (“ANDA”) or a 505(b)(2) NDA submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all of the data required for approval.

However, an application may be submitted 4 years after the NDA approval of the NCE if it contains a certification of patent invalidity or non-infringement.

Should the NDA holder commence litigation against the ANDA filer within 45 days of receipt of the certification notice, an automatic stay of the approval of any generic competition goes into effect until the earlier of:

(i) 30 months from the receipt of the certification;

or (ii) a court ruling of patent invalidity or non-infringement for the relevant patents.

In the absence of a court ruling, the 30-month stay will be extended by such amount of time (if any) that is required for 7.5 years to have elapsed from the date of NDA approval of the NCE.

On February 15, 2022, La Jolla received a paragraph IV notice of certification (the “Notice Letter”) from Gland Pharma Limited (“Gland”) advising that Gland had submitted an Abbreviated New Drug Application (“ANDA”) to the FDA seeking approval to manufacture, use or sell a generic version of GIAPREZA in the U.S.

prior to the expiration of U.S.

and 11,219,662 (the “GIAPREZA Patents”), which are listed in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations (the “Orange Book”).

The Notice Letter alleges that the GIAPREZA Patents are invalid, unenforceable and/or will not be infringed by the commercial manufacture, use or sale of the generic product described in Gland’s ANDA.

On March 29, 2022, La Jolla filed a complaint for patent infringement of the GIAPREZA Patents against Gland and certain related entities in the United States District Court for the District of New Jersey in response to Gland’s ANDA filing.

In accordance with the Hatch-Waxman Act, because GIAPREZA is a new chemical entity and La Jolla filed a complaint for patent infringement within 45 days of receipt of the Notice Letter, the FDA cannot approve Gland’s ANDA any earlier than 7.5 years from the approval of the GIAPREZA NDA unless the District Court finds that all of the asserted claims of the patents-in-suit are invalid, unenforceable and/or not infringed.

We intend to vigorously enforce our intellectual property rights relating to GIAPREZA.

Under the Generating Antibiotic Incentives Now (“GAIN”) provisions of the FDA Safety and Innovation Act (“FDASIA”), the FDA may designate a product as a qualified infectious disease product (“QIDP”).

In order to receive this designation, a drug must qualify as an antibacterial or antifungal drug for human use intended to treat serious or life-threatening infections.

We obtained a QIDP designation for the IV formulation of XERAVA for cIAI in July 2013.

Upon approving an application for a QIDP, the FDA will extend by an additional 5 years any non-patent marketing exclusivity period awarded, such as a 5-year exclusivity period awarded for

This extension is in addition to any pediatric exclusivity extension awarded.

XERAVA has been awarded this 5-year exclusivity under FDASIA.

Our Product Candidates

The following table summarizes the status of our primary product candidates:

(1) Zai Lab (Shanghai) Co., Ltd.

(“Zai Lab”) has licensed exclusive rights to SUL-DUR in the Asia-Pacific region.

(2) Global Antibiotic Research and Development Partnership (“GARDP”) will fully fund the Phase 3 clinical trial and pharmaceutical development activities and has commercial rights in WHO defined low-income and specified middle-income countries.

We have retained commercial rights in all major markets in North America, Europe and Asia-Pacific

Our lead product candidate, SUL-DUR, is a novel IV antibiotic.

The product is a combination of sulbactam, a β-lactam antibiotic, and durlobactam, our novel β-lactamase inhibitor (“BLI”) with broad spectrum β-lactamase coverage including Classes A, C and D, that we are developing for the treatment of a variety of serious infections caused by carbapenem-resistant Acinetobacter .

We have completed three separate Phase 1 clinical trials, including one evaluating the penetration of SUL-DUR into the lung and one in renally impaired patients.

Subsequently, we completed a Phase 2 clinical trial in patients with cUTIs.

We initiated ATTACK, our single Phase 3 registration trial in 2019, that evaluated SUL-DUR in patients with confirmed carbapenem-resistant Acinetobacter pneumonia and/or bloodstream infections.

We believe SUL-DUR has the ability to improve outcomes of patients with multidrug-resistant Acinetobacter infections, reducing their overall mortality.

We announced positive top-line Phase 3 data in October 2021 and based on our positive top-line Phase 3 data and the totality of our preclinical and clinical data, we filed a new drug application (“NDA”) with the FDA in September 2022.

The NDA was accepted for filing by the U.S.

We believe SUL-DUR has the ability to improve outcomes of patients with multidrug-resistant Acinetobacter infections, reducing their overall mortality.

Acinetobacter

Acinetobacter is a Gram-negative, opportunistic human pathogen that predominantly infects critically ill patients often resulting in severe pneumonia and bloodstream infections but can also infect other body sites as well.

Once thought to be mostly benign, Acinetobacter is now considered a global threat in the healthcare setting due in part to its ability to acquire multidrug resistance at rates not previously seen in other bacteria.

In addition, Acinetobacter has the ability to remain viable for up to 100 days in dry conditions and easily spreads via air or water droplets, which explains why the pathogen can often be found in many locations in the intensive care unit, or ICU, including bedrails, bedside tables, monitors of mechanical ventilators, intravenous pumps, door handles, stethoscopes and many other locations.

Of significant concern, one study reported greater than 98% of Acinetobacter isolates in an ICU from non-clinical sources such as bedrails and door handles, were determined to be multidrug resistant.

Pneumonia and bloodstream infections caused by drug-resistant Acinetobacter can have mortality rates approaching 50%.

Antibiotic-resistance rates of Acinetobacter to current standard-of-care treatments are some of the highest reported, between 30% and 50% in the United States and greater than 90% in parts of Europe and Asia.

Acinetobacter resistance to β-lactams is primarily driven by the expression of Class D β-lactamases, often in combination with Class A and/or Class C β-lactamases.

There are currently no effective antibiotics indicated for the treatment of multidrug-resistant Acinetobacter infections.

Durlobactam is the first clinical-stage BLI with sufficient broad-spectrum activity against class A, C, and D β-lactamases to potentially restore the efficacy of β-lactam antibiotics against multidrug-resistant Acinetobacter .

Sulbactam, the β-lactam antibiotic used in SUL-DUR has superior microbiological potency against Acinetobacter compared to other β-lactam antibiotics based on in vitro and in vivo analyses.

Historically, physicians used sulbactam to successfully treat Acinetobacter infections before development of broad β-lactamase mediated resistance rendered sulbactam on its own largely

We believe our data demonstrates that combining durlobactam with sulbactam can effectively restore the activity of sulbactam against multidrug-resistant strains of Acinetobacter .

Market Opportunity

We estimate that there are up to 200,000 hospital-treated Acinetobacter infections annually in the United States and Europe, of which up to 100,000 are carbapenem-resistant Acinetobacter infections, which we regard as our initial target markets for SUL-DUR.

We also believe there could be a significant market opportunity in Asia-Pacific, Central and South America, Russia and the Middle East given resistance rates exceeding 80% in some countries.

If approved, we believe SUL-DUR has the potential to address the issues of resistance facing existing regimens, which is currently limiting the utility of the carbapenems, and tolerability, which is a concern with regimens containing colistin.

There are currently no antibiotics indicated for the treatment of carbapenem-resistant Acinetobacter infections.

Clinical Development Plan

Completed Clinical Trials

Phase 3 registration trial:

We completed ATTACK, a Phase 3 registration trial of SUL-DUR for the treatment of patients with carbapenem-resistant Acinetobacter infections, with positive top-line data announced in October 2021.

ATTACK enrolled 207 patients at 95 clinical sites in 16 countries.

This was a two-part trial with Part A being the randomized, comparative portion (SUL-DUR vs colistin) in patients with documented Acinetobacter hospital-acquired bacterial pneumonia (HABP), ventilator-associated bacterial pneumonia (VAPB), ventilated pneumonia (VP), or bacteremia, and Part B being an open-labeled portion including Acinetobacter infections resistant to, or having previously failed colistin or polymyxin B treatment.

Baseline Acinetobacter isolates tested were greater than 95% carbapenem resistant.

SUL-DUR met the primary efficacy endpoint of 28-day all-cause mortality compared to colistin in the CRABC m-MITT population of Part A.

SUL-DUR mortality was 19.0% (12/63) compared to 32.3% (20/62) in the colistin arm (treatment difference of -13.2%;

Similar trends were demonstrated in 28-day and 14-day all-cause mortality favoring SUL-DUR across all study populations evaluated to date.

A statistically significant difference in clinical cure at Test of Cure (TOC) was observed with 61.9% in SUL-DUR arm compared to 40.3% in the colistin arm (95% CI 2.9-40.3).

In Part B, the 28-day all-cause mortality was 17.9% (5/28) and consistent with that observed in Part A.

Safety analyses from a total of 177 patients treated with SUL-DUR suggested that SUL-DUR was generally well-tolerated with a favorable safety profile compared to colistin.

SUL-DUR met the primary safety objective with a statistically significant lower incidence of nephrotoxicity as measured by the RIFLE classification for acute kidney injury.

SUL-DUR nephrotoxicity was 13.2% (12/91) versus 37.6% (32/85) in the colistin arm (p = 0.

Overall adverse events (AEs) in the safety population were comparable between treatment groups with 87.9% (80/91) in the SUL-DUR arm vs.

94.2% (81/86) in the colistin arm in Part A, 89.3% (25/28) in Part B.

Drug related AEs were 12.1% (10.7% in Part B) with SUL-DUR compared to 30.2% with colistin.

The most common non-infectious AEs (≥10%) in the SUL-DUR arm were diarrhea (16.5%), allergic and hypersensitivity reactions (16.5%), anemia (13.2%) and hypokalemia (12.1%) in Part A.

These AEs were also >10% in the colistin arm as was acute kidney injury.

On November 30, 2022, we announced that the U.S.

FDA accepted for Priority Review the new drug application (NDA) for SUL-DUR.

The FDA is currently planning to hold an advisory committee meeting to discuss this application.

The target PDUFA date (or action date) is May 29, 2023.

Phase 2 clinical trial in cUTI patients:

We completed a Phase 2 clinical trial in cUTI patients to provide additional safety and pharmacokinetic, or PK, data as well as efficacy data against carbapenem-resistant pathogens.

Eighty patients were randomized to receive either a dose of SUL-DUR or placebo every six hours for seven days.

Patients in both arms also received background therapy, which is current standard-of-care, with 500 mg of imipenem, or IMI, administered through IV every six hours.

There were no serious adverse events reported and the adverse event profile of SUL-DUR plus IMI was similar to that of the IMI comparator arm.

PK data observed in the Phase 2 trial was consistent with the PK data observed in the Phase 1 clinical trial in healthy volunteers.

We have completed three Phase 1 clinical trials, highlighted below, in addition to a Phase 2 clinical trial in patients with cUTIs.

In all of these clinical trials, SUL-DUR was observed to be generally well tolerated.

Four-part Phase 1 first-in-human trial:

Our four-part Phase 1 first-in-human clinical trial was conducted in Australia in 124 healthy volunteers.

SUL-DUR was generally well tolerated, with no dose-related systemic adverse events or drug-related serious adverse events reported.

SUL-DUR also exhibited linear dose-dependent increases in exposure and PK parameters across the dose range studied.

Phase 1 lung trial:

Our Phase 1 lung trial assessed the concentration of SUL-DUR in lung fluid, an important metric to understand, because ATTACK includes patients with pneumonia and lack of appropriate lung tissue penetration has been found to contribute to reduced efficacy.

We believe that the levels of SUL-DUR in the lung fluid achieved in this trial support its continued development as a potential treatment for pneumonia caused by Acinetobacter .

Phase 1 renal trial:

Our Phase 1 renal trial analyzed serum levels in renally impaired patients and provided data to enable the development of a dose adjustment protocol for the type of patient targeted in our ongoing Phase 3 registration trial.

We submitted an IND for SUL-DUR to the U.S.

FDA in June 2017, and the FDA notified us in July 2017 that we could proceed with this program.

The FDA granted Fast Track and QIDP designation for SUL-DUR in September 2017 for the treatment of hospital-acquired and ventilator-acquired bacterial pneumonia and bloodstream infections due to Acinetobacter .

Global Acinetobacter Surveillance Data

Durlobactam has broad activity against a wide range of β-lactamases, including Classes A, C and D, unlike currently marketed BLIs that primarily cover only Class A and Class C β-lactamases.

Durlobactam is the first BLI in clinical development with such a broad spectrum of in vitro activity.

SUL-DUR has also exhibited potent microbiological activity against Acinetobacter strains in vitro.

Over a series of studies summarized in the figure below, we have compared the effectiveness of SUL-DUR, sulbactam alone and comparators in inhibiting 7,221 strains of Acinetobacter that were collected from patients around the world between 2011 and 2020.

Amikacin and colistin were tested against 6,418 of the 7,221 strains.

The plot in the figure below presents the cumulative percentage of these strains inhibited by increasing concentrations of each of the tested compounds.

Sulbactam alone, as well as most of the other marketed antibiotics, had a very high MIC90 value of 64 mg/L, meaning that concentrations of 64 mg/L or greater were required to inhibit growth of 90% of the strains.

The corresponding breakpoints, which are established by the Clinical & Lab Standards Institute, or CLSI, as the specified concentrations for each antibiotic that define whether a strain is considered resistant, are significantly lower than their MIC90 values.

If the MIC90 of a drug is lower than its CLSI breakpoint, then that drug would be expected to be effective against more than 90% of the strains.

If a drug’s MIC90 is higher than its breakpoint, the drug would not be expected to have broad efficacy against those strains.

This cumulative analysis suggests that recent global strains of Acinetobacter are resistant to all the comparator antibiotics other than colistin, consistent with their significantly diminished clinical utility against Acinetobacter infections.

In contrast, SUL-DUR had very potent activity, with a much lower MIC90 of 2 mg/L.

This is lower than the CLSI breakpoint for sulbactam, which is 4 mg/L (in Unasyn ® , a combination of sulbactam and ampicillin), suggesting that our chosen target exposure levels of SUL-DUR may be effective against more than 90% of global, multidrug resistant Acinetobacter strains.

A subset of 926 isolates out of the 7,221 strains tested were from Chinese hospitals collected in 2016-2018.

831 of the 926 (84.6%) Chinese isolates were carbapenem-resistant.

In contrast, SUL-DUR showed potent activity against this subset, with an MIC90 of 2 mg/L and 97.9% of isolates susceptible to ≤

4 mg/L of SUL-DUR.

We are initially developing SUL-DUR for the treatment of multidrug-resistant Acinetobacter infections.

Due to rising resistance rates, standard-of-care treatment for multidrug-resistant Acinetobacter infections often includes a combination of several last-line treatment options, including carbapenems, tetracyclines, polymyxins, and other generically available agents.

Despite using best available therapy, mortality rates of patients with multidrug-resistant Acinetobacter infections are reported as high as 50%.

As of the date of this report, we are not aware of any marketed antibiotic that is indicated for the treatment of multidrug-resistant Acinetobacter infections;

however, we are aware of other potentially competitive products that have shown in vitro activity against some strains of Acinetobacter.

Melinta Therapeutics Inc.

currently markets minocycline.

Although recently approved for treating cUTIs, Fetroja ® , from Shionogi & Co., Ltd., includes in its label a specific warning of an observed increase in all-cause mortality in patients with carbapenem-resistant Gram-negative bacterial infections that were treated with the drug.

BioVersys AG reported in May 2022 that their lead program BV100, being developed specifically for multidrug-resistant Acinetobacter infections, completed three Phase 1 clinical trials.

Commercial Approach

In the United States, our commercial strategy is driven by our understanding of where Acinetobacter infections are known to exist.

Given that Acinetobacter infections more commonly occur in immunocompromised patients, treatment settings for these patients are frequently large intensive care units (ICUs), specialized centers like transplant, cancer, and burn, outpatient long-term acute centers (LTACs) and home infusion.

SUL-DUR has been developed specifically for multi-drug resistant Acinetobacter infections and we believe the unmet need and value proposition of SUL-DUR will support its use for treating infections caused by this serious Gram-negative pathogen.

This value proposition includes:

Acinetobacter infections currently cost lives.

There is an urgent, global unmet medical need due to the limitations of currently available treatment options.

Published mortality rates of Acinetobacter infections treated with best available therapy are reported to exceed 50%.

Acinetobacter infections currently cost time.

These serious infections directly lead to time in a hospital where hospital length of stay is often measured in months or weeks instead of days.

Acinetobacter infections currently cost money.

Given the limitations described above, carbapenem-resistant Acinetobacter infections are reported to be one of the costliest to treat, exceeding $75,000 per case based upon published literature.

We believe the data from ATTACK, combined with our overall preclinical and clinical data package, clearly demonstrate an efficacy and safety benefit of SUL-DUR over colistin in treating carbapenem resistant Acinetobacter infections.

Current Acinetobacter treatment protocols allow for clear positioning of SUL-DUR.

Patients with suspected Acinetobacter infections are frequently treated with a broad-spectrum antibiotic, commonly a carbapenem, as first-line therapy.

If susceptibility testing identifies that the causative bacterial pathogen is carbapenem-resistant Acinetobacter , the patient is then frequently switched to a colistin-based antibiotic regimen in an attempt to successfully treat the infection.

Published literature, however, reports greater than 50% mortality rates using colistin-based regimens.

We believe that the data from the ATTACK Phase 3 registration trial demonstrate improved efficacy and safety profiles, that could result in SUL-DUR, if approved, being preferred to a colistin-based regimen for the treatment of multidrug-resistant, including carbapenem-resistant, Acinetobacter infections.

Multidrug-resistant Acinetobacter infections also present a significant unmet medical need in China and across the broader Asia/Pacific territory.

Our collaboration and license agreement with Zai Lab, which included their participation in the ATTACK Phase 3 registration clinical trial, provides a potentially accelerated path for regulatory approval and commercialization in China and Asia-Pacific territories.

Zai Lab supported the enrollment of approximately 25% of the evaluable patients in ATTACK from China, which we believe will support a regulatory submission in China.

Under our agreement with Zai Lab, we receive upfront, milestone and royalty payments in addition to payment of certain Phase 3 registration clinical trial costs.

We maintain 100% of the rights and associated economics in North America and Europe.

Outside of the United States, we intend to work with multi-national pharmaceutical companies to leverage their commercialization capabilities in territories not covered by our agreement with Zai Lab.

In January 2023, Zai Lab announced that the Center for Drug Evaluation of China’s National Medical Products Administration has granted priority review status to the NDA for SUL-DUR for the treatment of infections caused by Acinetobacter baumannii, including multidrug-resistant and carbapenem-resistant (CRAB) strains.

Our second late-stage product candidate is zoliflodacin, a potential single oral dose cure for the treatment of uncomplicated gonorrhea caused by the bacterial pathogen N.

gonorrhoeae .

Gonorrhea is an area of significant medical need and zoliflodacin is the only novel single dose treatment in development that provides a potential monotherapy oral alternative to intramuscular injections of ceftriaxone for the treatment of gonorrhea, including infections caused by drug-resistant strains.

Zoliflodacin targets the validated mechanism of action of the fluoroquinolone class of antibiotics but does so in a novel manner to avoid existing fluoroquinolone resistance.

We have completed several Phase 1 clinical trials and a Phase 2 clinical trial of zoliflodacin in patients with uncomplicated gonorrhea.

In collaboration with GARDP, in 2019 we initiated a single Phase 3 registration trial of zoliflodacin in patients with uncomplicated gonorrhea.

GARDP will fund all the Phase 3 clinical trial and pharmaceutical development costs and in return will receive commercial rights for zoliflodacin in WHO-defined low-income and select middle-income countries.

We have retained commercial rights in all other countries, including the major markets in North America, Europe and Asia-Pacific.

Uncomplicated gonorrhea is an N. gonorrhoeae infection of the urethra, cervix, pharynx or rectum, and is more common than complicated gonorrhea, which includes spread of the infection to other tissues and potentially the bloodstream.

Gonorrhea can be associated with serious complications, including pelvic inflammatory disease, ectopic pregnancy and infertility, as well as an increased risk of human immunodeficiency virus, or HIV.

Despite the continued use of effective antibiotics, it remains one of the most common sexually transmitted bacterial infections in the world with an estimated 82.4 million people worldwide infected each year.

The occasional absence of symptoms, more frequent in women, is thought to be one reason for sustained levels of infection.

Antibiotics remain the mainstay for treating uncomplicated gonorrhea caused by N.

gonorrhoeae is the bacterial pathogen responsible for gonorrhea and has a strong propensity for uptake of chromosomal DNA from other genera of Neisseria which allows the bacteria to accumulate many mutations in chromosomal genes leading to frequent resistance of antibiotics.

For example, penicillin was introduced for N.

gonorrhoeae infections in 1943, and initial resistance was reported in 1945.

Fluoroquinolone antibiotics were first used to treat gonorrhea in 1949 and have been one of the most successful classes of antibiotics against N.

gonorrhoeae , but even so resistance was identified in 1969.

One member of this class, ciprofloxacin, was introduced in 1980 and resistance was identified in 1990.

More recently cephalosporin antibiotics, notably cefixime, had been widely used for the treatment of gonorrhea due to their oral administration along with a favorable efficacy and safety profile, although resistance by N.

gonorrhoeae has been reported since 2007.

As widespread use of these antibiotics drove the emergence of drug-resistant N.

gonorrhoeae strains, treatment guidelines have subsequently been amended.

Ceftriaxone is currently the only CDC-recommended option for the treatment of gonorrhea and, until recently, was administered with azithromycin, a broad-spectrum antibiotic, to provide coverage against other sexually transmitted diseases that tend to occur concurrently with gonorrhea.

However, rising resistance of N.

gonorrhoeae to azithromycin recently prompted the CDC to now recommend 500mg ceftriaxone monotherapy.

Ceftriaxone is administered by intramuscular injection, which can be painful and may require patient monitoring by a healthcare administrator.

Although ceftriaxone remains effective in most of the U.S., in Hawaii and Massachusetts as well as in several countries, including China, Japan, Vietnam, South Korea, France and Spain, N.

gonorrhoeae strains with resistance to azithromycin and ceftriaxone have been reported, prompting concerns that multidrug-resistant gonorrhea may become a major community health issue.

Market Opportunity

gonorrhoeae is an immediate global public health threat with 82.4 million cases worldwide in 2020 (WHO estimate).

Cases of gonorrhea in the United States have reached an estimated 1.6 million per year.

The WHO worldwide estimate of approximately 82.4 million new cases includes infected adolescents and adults aged 15–49 years.

The CDC estimates that the cases of gonorrhea in the United States have been increasing at least 10% per year since 2009.

In April 2021, the CDC announced that sexually transmitted diseases in the U.S.

reached all-time high for 6th consecutive year, with approximately 2.6 million cases of chlamydia, gonorrhea & syphilis reported in 2019.

The results of a 2017-2018 survey of countries reporting decreased susceptibility, DS, or resistance, R, of N.

gonorrhoeae to current antibiotics are reflected in the table below.

Historically, to reduce the risk of spreading drug-resistant N.

gonorrhoeae , the CDC has changed treatment guidelines when resistance rates to recommended first-line treatments reach 5%.

Since 2015, there has only been one recommended treatment on CDC guidelines for gonorrhea:

250mg intramuscular injection of ceftriaxone plus 1g of oral azithromycin.

In 2020 the CDC once again updated its treatment guideline, now recommending a 500mg intramuscular injection of ceftriaxone for treatment of uncomplicated gonorrhea.

This follows a 2019 update in the United Kingdom where recommended empirical treatment of gonorrhea is now 1 g intramuscular ceftriaxone monotherapy.

Clinical Development Plan

Ongoing Registration Trial

Phase 3 registration trial:

In 2019, we announced the initiation of a global, multi-center Phase 3 registration trial in collaboration with GARDP who is conducting and funding all Phase 3 clinical trial and pharmaceutical development costs.

Up to 18 clinical trial sites are planned across the U.S., Thailand, South Africa, the Netherlands and Belgium.

Our Phase 3 registration trial is a multi-center, open-label, noninferiority trial in approximately 1,000 enrolled patients with uncomplicated gonorrhea who will be randomized on a 2:1 basis to receive either a single 3.0g oral dose of zoliflodacin or a regimen of 500mg intramuscular ceftriaxone plus 1g oral azithromycin.

The primary endpoint will be the proportion of patients with microbiological cure at urethral or cervical sites, approximately six days after treatment.

The Data Safety Monitoring Board, or DSMB, in May 2021 recommended to continue the study without modification.

Despite the ongoing challenges with the COVID-19 pandemic, we have observed an increase in the enrollment rate recently and based on current enrollment rates we anticipate completion of trial enrollment in 2023.

Based on our discussions with the U.S.

FDA, we believe that the efficacy data from this single Phase 3 registration trial, if positive, along with the data from our other clinical trials of zoliflodacin, will be sufficient to support the submission of an NDA to the U.S.

Completed Clinical Trials

Phase 2 clinical proof-of-concept trial:

We have completed a multi-center, randomized, open-label Phase 2 clinical trial comparing a single oral dose of 2.0g or 3.0g of zoliflodacin to 500mg intramuscular ceftriaxone for the treatment of uncomplicated gonorrhea.

In this trial, 179 randomized patients received treatment and zoliflodacin was generally well tolerated, with efficacy outcomes comparable to ceftriaxone.

Microbiological eradication and clinical cure in urogenital infections with a single dose of zoliflodacin, the primary endpoint of the trial, was comparable to ceftriaxone, with 100% cure rate in both the 3.0g zoliflodacin and ceftriaxone groups in the per-protocol population.

The results of this clinical trial were published in The New England Journal of Medicine in 2018.

Phase 1 clinical trial:

We evaluated zoliflodacin in two Phase 1 clinical trials studying 72 healthy volunteers in total.

In one trial, we evaluated PKs and tolerability in 48 subjects and food effects in 18 subjects, and in the second trial, we evaluated absorption, distribution, metabolism and excretion in six subjects.

Zoliflodacin was generally well tolerated in these trials at doses we would expect to be clinically active for treating uncomplicated gonorrhea.

Administration of a high-fat meal was associated with an increase in zoliflodacin plasma concentration, suggesting that zoliflodacin could be administered with or without food.

Preclinical Data

We have generated biochemical, microbiological and in vivo data on zoliflodacin.

The data suggest that zoliflodacin retains potent activity against contemporary clinical isolates in the U.S., Europe, China, Thailand and South Africa that are resistant to other antibiotic classes including fluroquinolones, which was expected given its novel mechanism of action.

In addition, the data show

significant resistance against two of the four standard antibiotics indicated for gonorrhea, ciprofloxacin, a fluoroquinolone, and azithromycin, a macrolide.

We are initially developing zoliflodacin as a single oral dose treatment for uncomplicated gonorrhea.

Gonorrhea is commonly treated with 500mg intramuscular ceftriaxone, a generically available agent.

Additional generic cephalosporins and fluoroquinolones are also prescribed, but not recommended as primary treatment options given current resistance rates.

Gepotidacin, currently under development for a variety of infections by GlaxoSmithKline plc, is the only potentially competitive product candidate in late-stage clinical development that we are aware of that is being developed for the treatment of uncomplicated urogenital gonorrhea.

A Phase 3 clinical trial (EAGLE-1) was initiated by GlaxoSmithKline in October 2019.

A prior Phase 2 clinical trial revealed the emergence of resistance to gepotidacin in 2 urogenital microbiological failures following administration of a single oral dose.

In an attempt to overcome this resistance, gepotidacin will be given in two oral doses in the EAGLE-1 clinical trial;

a 4-tablet 3000 milligram (mg) oral dose at the study site followed by another 4-tablet 3000mg oral dose as an outpatient.

Commercial Approach

Antibiotics to treat uncomplicated gonorrhea will typically be available through primary care physicians, outpatient clinics and emergency rooms, and numerous community sites.

In addition, placement on CDC guidelines has historically driven awareness and uptake in the U.S.

We have partnered with GARDP who will lead the commercialization of zoliflodacin in certain WHO-defined low-income and specified middle-income countries.

Zoliflodacin is a potential single dose cure (sachet in water) that can facilitate “expedited partner therapy”

at home, which may lower the chance for a repeat infection from a partner.

Expedited partner therapy, or EPT, is the clinical practice of treating the sex partners of patients diagnosed with chlamydia or gonorrhea by providing prescriptions or medications to the patient to take to his/her partner without the health care provider first examining the partner.

Within the United States, EPT is permissible in 45 states, potentially allowable in 4 states and is only prohibited in one state.

Manufacturing

Manufacturing of RELVAR ® /BREO®ELLIPTA ® (FF/VI) and ANORO ® ELLIPTA ® (UMEC/VI) is performed by GSK.

We rely on third-party manufacturers to produce GIAPREZA and XERAVA and expect to continue to do so in the foreseeable future to meet our development and commercial needs.

In all of our manufacturing agreements, we require that contract manufacturers produce active pharmaceutical ingredients (“APIs”) and drug products in accordance with the FDA’s current Good Manufacturing Practices (“cGMPs”) and all other applicable laws and regulations.

We maintain confidentiality agreements with potential and existing manufacturers in order to protect our proprietary rights related to GIAPREZA and XERAVA.

The long-term commercial success of GIAPREZA and XERAVA will depend in part on the ability of our contract manufacturers to supply cGMP-compliant API and drug product without interruption.

With respect to our product candidates, we currently rely on third-party contract manufacturers for our required raw materials, drug substance, and finished drug product for our preclinical research and clinical trials.

Although we have contracts with these third parties to meet our current clinical supply needs, we do not have any current contractual relationships with these third parties for the manufacture of commercial supply of our product candidates after they are approved.

As our product candidates approach potential approval by any regulatory agency, we intend to enter into agreements with third-party contract manufacturers for the commercial production of those products.

We currently employ internal resources to manage our manufacturing vendor relationships and processes.

Government Regulation

Government authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among other things, the research, development, testing, manufacture, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, import and export of our products and reimbursement.

The process of obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulation require the expenditure of substantial time and financial resources.

Government Regulation

In the United States, the process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local statutes and regulations requires the expenditure of substantial time and financial resources.

The failure to comply with the

applicable requirements at any time during the product development process, approval process or after approval may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and untitled letters, product recalls, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of government contracts, restitution, disgorgement of profits or civil or criminal penalties.

Approval Processes

In the United States, the FDA regulates drugs under the Federal Food, Drug and Cosmetic Act, or the FDCA, the Public Health Service Act, or PHSA, and implementing regulations.

Failure to comply with the FDCA and other applicable U.S.

requirements at any time during the product development process, approval process or after approval may subject us to a variety of administrative or judicial sanctions, any of which could have a material adverse effect on us.

These sanctions could include:

refusal to approve pending applications;

withdrawal of an approval;

imposition of a clinical hold;

warning letters, untitled letters and similar communications;

product seizures or recalls;

total or partial suspension of production or distribution, or injunctions, fines, restitution, disgorgement of profits or civil or criminal investigations and penalties brought by the FDA and the Department of Justice, or DOJ, or other

The process required by the FDA before a drug may be marketed in the United States generally involves the following:

completion of preclinical laboratory tests, animal studies and formulation studies conducted according to Good Laboratory Practices or other applicable regulations;

submission to the FDA of an IND application, which must become effective before human clinical trials may begin;

approval by an independent institutional review board, or IRB, representing each clinical site before each clinical trial may be initiated;

performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug for its intended use, conducted in accordance with current good clinical practices, or cGCP, which are ethical and scientific quality standards and FDA requirements for conducting, recording and reporting clinical trials to assure that the rights, safety and well-being of trial participants are protected;

preparation and submission to the FDA of an NDA;

satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product is produced to assess compliance with current good manufacturing practices, or cGMP, requirements to assure that the facilities, methods and controls are adequate to preserve the drug’s safety, identity, strength, quality and purity;

FDA review and approval of the NDA.

Once a pharmaceutical candidate is identified for development, it enters the preclinical testing stage.

Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies.

An IND sponsor must submit the results of the preclinical tests, together with manufacturing information and analytical data, to the FDA as part of the IND.

Some preclinical or nonclinical testing may continue even after the IND is submitted.

In addition to including the results of the preclinical studies, the IND will also include one or more protocols detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated if the first phase lends itself to an efficacy determination.

The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, places the IND on clinical hold.

In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can begin.

A clinical hold may occur at any time during the life of an IND and may affect one or more specific studies or all studies conducted u1nder the IND.

All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with cGCP.

They must be conducted under protocols detailing, among other things, the objectives of the trial, dosing procedures, subject selection and

exclusion criteria and the safety and effectiveness criteria to be evaluated.

Each protocol and any amendments must be submitted to the FDA as part of the IND, and progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently in other situations, including the occurrence of serious adverse events.

An IRB at each institution participating in the clinical trial must review and approve the protocol and any amendments before a clinical trial commences or continues at that institution, approve the information regarding the clinical trial and the informed consent form that must be provided to each trial subject or his or her legal representative, monitor the study until completed and otherwise comply with IRB regulations.

Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health for public dissemination on their ClinicalTrials.gov website.

Human clinical trials are typically conducted in three sequential phases that may overlap or be combined:

The drug is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption, distribution, metabolism and elimination.

In the case of some products for severe or life-threatening diseases, such as multidrug-resistant infections, especially when the product may be inherently too toxic to ethically administer to healthy volunteers, the initial human testing is often conducted in patients with the target disease or condition.

Clinical trials are initiated in a limited patient population intended to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage.

Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population at geographically dispersed clinical study sites.

These studies are intended to establish the overall risk-benefit ratio of the product and provide an adequate basis for regulatory approval and product labeling.

Phase 1, Phase 2 and Phase 3 testing may not be completed successfully within any specified period, if at all.

The FDA or the sponsor may suspend or terminate a clinical trial at any time for a variety of reasons, including a finding that the research subjects or patients are being exposed to an unacceptable health risk.

Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.

During the development of a new drug, sponsors are given opportunities to meet with the FDA at certain points, including prior to submission of an IND, at the end of Phase 2 and before an NDA is submitted.

Meetings at other times may also be requested.

These meetings can provide an opportunity for the sponsor to share information about the data gathered to date, for the FDA to provide advice and for the sponsor and the FDA to reach agreement on the next phase of development.

Sponsors typically use the end-of-Phase 2 meeting to discuss their Phase 2 clinical results and present their plans for the pivotal Phase 3 clinical trial or trials that they believe will support approval of the new drug.

The Pediatric Research Equity Act, or PREA, requires a sponsor to conduct pediatric studies for certain drugs and biologics.

Specifically, PREA requires original NDAs, biologic license applications, or BLAs, and supplements thereto for a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration to contain a pediatric assessment unless the sponsor has received a deferral or waiver.

Concurrent with clinical trials, companies usually complete additional animal safety studies and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the product in accordance with cGMP requirements.

The manufacturing process must be capable of consistently producing quality batches of the drug candidate and the manufacturer must develop methods for testing the quality, purity and potency of the final drugs.

Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf-life.

The results of product development, preclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests conducted on the chemistry of the drug, proposed labeling and other relevant information are submitted to the FDA as part of an NDA requesting approval to market the product for one or more indications.

The submission of an NDA is subject to the payment of user fees, but a waiver of such fees may be obtained under specified circumstances.

The FDA reviews all NDAs submitted to ensure that they are sufficiently complete for substantive review before it accepts them for filing.

It may request additional information rather than accept an NDA for filing.

In this event, the NDA must be resubmitted with the additional information.

The resubmitted application also is subject to completeness review before the FDA accepts it for filing.

Once the submission is accepted for filing, the FDA begins an in-depth review.

NDAs receive either standard or priority review.

A drug that, if approved, would represent a significant improvement in the safety or effectiveness of the treatment, prevention or diagnosis of a serious disease or condition may receive priority review.

Requests for priority review generally must be submitted at the

time of NDA submission.

The FDA has agreed to specified performance goals in the review process of NDAs.

Under that agreement, 90% of applications seeking approval of new molecular entities, or NMEs, are meant to be reviewed within ten months from the date on which FDA accepts the NDA for filing, and 90% of applications for NMEs that have been designated for “priority review”

are meant to be reviewed within six months of the filing date.

For applications seeking approval of drugs that are not NMEs, the ten-month and six-month review periods run from the date that FDA receives the application.

The review process may be extended by the FDA for three additional months to consider a major amendment to the application following the original submission.

The FDA reviews an NDA to determine, among other things, whether a product is safe and effective for its intended use and whether its manufacturing complies with cGMP requirements to assure and preserve the product’s safety, identity, strength, quality and purity.

The FDA may refer the NDA to an advisory committee for review and recommendation as to whether the application should be approved and under what conditions.

The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendation.

Before approving an NDA, the FDA will typically inspect the facility or facilities where the product is manufactured and tested.

These pre-approval inspections may cover all facilities associated with NDA submission, including drug component manufacturing (such as active pharmaceutical ingredients), finished drug product manufacturing, and control testing laboratories.

Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with cGCP.

In addition, the FDA may require, as a condition of approval, risk evaluation and mitigation strategies, or REMS (which may include requirements for, restricted distribution and use), enhanced labeling, special packaging or labeling, expedited reporting of certain adverse events, pre-approval of promotional materials, restrictions on direct-to-consumer advertising or commitments to conduct additional research post-approval.

On the basis of the FDA’s evaluation of the NDA and accompanying information, the FDA may issue an approval letter or a complete response letter.

An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications.

If the FDA ultimately decides that the NDA does not satisfy the criteria for approval, the FDA will issue a complete response letter to indicate that the agency will not approve the NDA in its present form.

The complete response letter usually describes all of the specific deficiencies in the NDA identified by the FDA.

If a complete response letter is issued, the applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application.

Expedited Review and Approval

The FDA has various programs, including Fast Track and priority review, which are intended to expedite or simplify the process for developing and/or reviewing drugs.

Even if a drug qualifies for one or more of these programs, the FDA may later decide that the drug no longer meets the conditions for qualification or that the time period for FDA review or approval will not be shortened.

Generally, drugs that may be eligible for these programs are those for serious or life-threatening conditions, those with the potential to address unmet medical needs and those that offer meaningful benefits over existing treatments.

For example, Fast Track is a process designed to facilitate the clinical development and expedite the review of drugs to treat serious diseases with the potential, based on nonclinical or clinical data, to fill an unmet medical need.

Priority review is designed to give drugs that offer a significant improvement in safety or effectiveness of treatment for a serious condition an expedited review within eight months from the completed submission (six months from filing) as compared to a standard review time of twelve months from the completed submission (10 months from filing) for a standard new molecular entity NDA.

Although Fast Track and priority review do not affect the standards for approval, the FDA will attempt to facilitate early and frequent meetings with a sponsor of a Fast Track designated drug and expedite review of the application for a drug designated for priority review.

The Generating Antibiotic Incentives Now Act, or GAIN Act, is intended to provide incentives for the development of new QIDPs.

A new drug that is designated as a QIDP after a request by the sponsor that is made before an NDA is submitted will be eligible, if approved, for an additional five years of exclusivity beyond any period of exclusivity to which it would have previously been eligible.

In addition, a QIDP will receive priority review and qualify for a Fast Track designation.

QIDPs are defined as antibacterial or antifungal drugs intended to treat serious or life-threatening infections, including those caused by an antibacterial or antifungal resistant pathogen or qualifying pathogens identified by the FDA.

XERAVA and SUL-DUR have been designated by the FDA as a QIDP.

Zoliflodacin has also been designated as a QIDP by the FDA for the treatment of uncomplicated gonorrhea.

Patent Term Restoration and Data Exclusivity

Depending upon the timing, duration and specifics of FDA approval of the use of our drugs, some of our U.S.

patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch-Waxman Amendments.

As noted above, the Hatch-Waxman Amendments permit a patent restoration term of up to five years for a single patent for an approved product as compensation for patent term lost during product development and the FDA regulatory review process.

However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14

years from the product’s approval date and only those claims covering such approved drug product, a method for using it or a method for manufacturing it may be extended.

Only one patent applicable to an approved drug is eligible for the extension and the application for the extension must be submitted prior to the expiration of the patent.

The USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.

We have applied for restoration of patent term for one U.S.

Patent covering XERAVA and, in the future, we may apply for restoration of patent term for other currently owned or licensed patents to add patent life beyond its current expiration date, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant NDA.

Data exclusivity provisions under the FDCA also can delay the submission or the approval of certain applications.

The FDCA provides a five-year period of non-patent data exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity.

A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance.

During the exclusivity period, the FDA may not accept for review an abbreviated new drug application, or ANDA, or a 505(b)(2) NDA submitted by another company using the drug entitled to data exclusivity as the reference listed drug, or RLD.

However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement.

The FDCA also provides three years of data exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, for new indications, dosages or strengths of an existing drug.

This three-year exclusivity covers only the use or conditions of use associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original active agent for other uses or conditions of use.

Five-year and three-year exclusivity will not delay the submission or approval of a full NDA.

However, an applicant submitting a full NDA would be required to conduct its own preclinical and clinical studies in support of its application or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

In addition, as described above, under the GAIN Act a new drug that is designated as a QIDP is eligible for an additional five years of exclusivity to be added to certain other exclusivity periods that the application may qualify for upon approval, specifically five-year exclusivity, three-year exclusivity, and orphan exclusivity.

Pediatric Exclusivity

The Best Pharmaceuticals for Children Act provides for an additional six months of exclusivity, which is added on to patent and exclusivity periods in effect at the time the pediatric exclusivity award is granted, if a sponsor conducts clinical trials in children in response to a written request from the FDA, or a Written Request.

The FDA may request studies on approved indications in separate Written Requests.

The issuance of a Written Request does not require the sponsor to undertake the described studies.

To date, we have not received any Written Requests.

Post-approval Requirements

Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market.

Later discovery of previously unknown problems, including safety issues, with a product may result in restrictions on the product or even complete withdrawal of the product from the market.

After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further FDA review and approval.

In addition, the FDA may require testing and surveillance programs to monitor the effect of approved products that have been commercialized, and the FDA has the power to prevent or limit further marketing of a product based on the results of these post-marketing programs.

The FDA and other authorities also strictly regulate the promotional claims that may be made about prescription products.

Under the FDCA the sponsor of an approved drug in the United States may not promote that drug for unapproved, or off-label, uses, although a physician may prescribe a drug for an off-label use in accordance with the practice of medicine.

If we are found to have promoted off-label uses, we may be subject to significant liability, including sanctions, civil and criminal fines and penalties, and injunctions prohibiting us from engaging in specified promotional conduct.

Moreover, any drug products manufactured or distributed pursuant to FDA approvals are subject to continuing regulation by the FDA, including, among other things:

record-keeping requirements;

reporting of adverse experiences with the drug;

providing the FDA with updated safety and efficacy information;

drug sampling and distribution requirements;

notifying the FDA and gaining its approval of specified manufacturing or labeling changes;

complying with certain electronic records and signature requirements;

complying with FDA promotion and advertising requirements.

Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and some state agencies for compliance with cGMP requirements and other laws.

Failure to comply with the FDCA and other applicable U.S.

These sanctions could include:

refusal to approve pending applications;

withdrawal of an approval;

imposition of a clinical hold;

warning letters, untitled letters and similar communications;

product seizures or recalls;

total or partial suspension of production or distribution;

injunctions, fines, restitution, disgorgement of profits or civil or criminal investigations and penalties brought by the FDA and DOJ, or other governmental entities.

From time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the approval, manufacturing and marketing of products regulated by the FDA.

In addition, FDA regulations and guidance are often revised or reinterpreted by the agency in ways that may significantly affect our business and our products.

It is impossible to predict whether legislative changes will be enacted, or FDA regulations, guidance or interpretations changed or what the impact of such changes, if any, may be.

Foreign Regulation

In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products.

Whether or not we obtain FDA approval for a product, we must obtain approval by the comparable regulatory authorities of foreign countries or economic areas, such as the EU, before we may commence clinical trials or market products in those countries or areas.

The approval process and requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from place to place, and the time may be longer or shorter than that required for FDA approval.

Under EU regulatory systems, a company may submit marketing authorization applications under the centralized, decentralized or mutual recognition procedures, or under the purely national route of approval.

The centralized procedure is compulsory for medicinal products produced by biotechnology or those medicinal products containing new active substances for specific indications such as the treatment of acquired immune deficiency syndrome, or AIDS, cancer, neurodegenerative disorders, diabetes, viral diseases, and designated orphan medicines, and is optional for other medicines that are highly innovative.

Under the centralized procedure, a marketing application is submitted to the European Medicines Agency, or EMA, where it will be evaluated by the relevant scientific committee, in most cases the Committee for Medicinal Products for Human Use, and a favorable opinion typically results in the grant by the European Commission of a single marketing authorization that is valid for all EU member states and, by extension (after national implementing measures), in Norway, Iceland and Liechtenstein.

In general, an initial marketing authorization is valid for five years, but once renewed is usually valid for an unlimited period.

The decentralized procedure allows marketing authorization applications to be submitted simultaneously in two or more EU member states, whereas the mutual recognition procedure must be used if the product has already been authorized in at least one other EU member state.

Both the decentralized and mutual recognition procedures provide for approval by one or more “concerned”

member states based on an assessment of an application performed by one-member state, known as the “reference”

member state.

Under the decentralized approval procedure, an applicant submits an application, or dossier, and related materials to the reference member state and concerned member states.

The reference member state prepares a draft assessment and drafts of the related materials within 120 days after receipt of a valid application.

Within 90 days of receiving the reference member state’s assessment report, each

concerned member state must approve the assessment report and related materials, unless they identify a serious risk to public health.

Under the mutual recognition procedure, the concerned member states have the same 90-day period to recognize the marketing authorization in the reference member state.

In either case, concerns about serious risks to public health escalate through the relevant EMA scientific committees, and the disputed points may eventually result in a consensus opinion from the Committee for Medicinal Products for Human Use that is referred to the European Commission, whose decision is binding on all member states.

The purely national procedure results in a marketing authorization in a single EU member state.

Following the result of a referendum in 2016, the United Kingdom left the EU on January 31, 2020, and as of January 1, 2021, the United Kingdom and EU operate separate regulatory regimes.

The UK and EU announced on December 24, 2020, that they had agreed a Trade and Cooperation Agreement, or TCA, to govern their future relationship.

The TCA remains provisional until formally ratified by the EU.

The TCA sets out the new arrangements for trade of goods, including medicines and medical devices, which aims to ensure goods continue to flow between the EU and the UK and also has implications for product regulation and mutual recognition.

As a result of the United Kingdom’s departure from the EU, if a company wishes to sell its products in the United Kingdom, it will need to seek and maintain appropriate national marketing authorizations.

The TCA does not provide for wholesale mutual recognition of the regulatory regimes and so products exported from the UK to the EU must comply with the EU’s regulatory requirements.

In the pharmaceutical context, this has had a number of implications.

From January 31, 2020, the UK no longer participated in EU institutions and their decision-making, including approval decisions under the centralized procedure.

Moreover, the movement of finished pharmaceutical products into the EU from the UK is treated as an import from a third country.

Since the TCA does not provide for mutual recognition of batch testing and release, products must be quality control tested and released in the EU.

However, the UK will unilaterally waive batch testing requirements for UK imports from the EU for products placed on the market before January 2023.

It remains to be seen how these developments will impact regulatory requirements for product candidates and products in the United Kingdom.

Reimbursement

Significant uncertainty exists as to the coverage and reimbursement status of products approved by the FDA and other government authorities.

Sales of products will depend, in part, on the extent to which third-party payors, including government health programs in the United States such as Medicare and Medicaid, commercial health insurers and managed care organizations, provide coverage, and establish adequate reimbursement levels for, such products.

The process for determining whether a payor will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the product once coverage is approved.

Third-party payors are increasingly challenging the prices charged, examining the medical necessity, and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs.

Third-party payors may limit coverage to specific products on an approved list, or formulary, which might not include all the approved products for a particular indication.

For example, in the U.S.

and most major foreign markets, drugs like GIAPREZA and XERAVA that are administered in the hospital must be purchased by the hospital and generally are not reimbursed by third-party payors.

Hospitals instead are reimbursed for patient cases based on patients’

diagnosed conditions under the U.S.

Medicare diagnosis-related group (“DRG”) system or other like systems for non-Medicare patients in the U.S.

and in most major foreign markets.

Adoption of new drugs that are administered in the hospital generally occurs more slowly than adoption of new drugs that are taken on an outpatient basis, which generally are paid for by third-party payors.

To secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct expensive pharmacoeconomic studies to demonstrate the medical necessity and cost effectiveness of the product, in addition to the costs required to obtain FDA or other comparable regulatory approvals.

Nonetheless, product candidates may not be considered medically necessary or cost effective.

Additionally, a payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved.

Further, one payor’s determination to provide coverage for a drug product does not ensure that other payors will also provide coverage for the drug product.

Third-party reimbursement may not be sufficient to maintain price levels high enough to realize an appropriate return on investment in product development.

Health Care Laws Governing Interactions with Healthcare Providers

In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws restrict our business activities, including certain marketing practices.

These laws include, without limitation, anti-kickback laws, false claims laws, data privacy and security laws, as well as transparency laws regarding payments or other items of value provided to healthcare providers.

The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item, good, facility or service reimbursable under Medicare, Medicaid or other federal healthcare programs.

The term “remuneration”

has been broadly interpreted to include anything of value.

This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers, among others, on the other.

Although there are several statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions, the exceptions and safe harbors are drawn narrowly, and practices that involve remuneration that are alleged to be intended to induce prescriptions, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor.

Failure to meet all requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the federal Anti-Kickback Statute.

Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all its facts and circumstances.

Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal healthcare covered business, the federal Anti-Kickback Statute has been violated.

Additionally, the intent standard under the federal Anti-Kickback Statute was amended by the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010, collectively the Affordable Care Act, or ACA, to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

In addition, the ACA codified case law that a claim for payment for items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

Federal false claims laws, including the civil False Claims Act, and civil monetary penalties laws prohibit any person or entity from, among other things, knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to have a claim paid.

Pharmaceutical and other healthcare companies have been prosecuted under these laws for, among other things, allegedly inflating drug prices they report to pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product.

In addition, certain marketing practices, including off-label promotion, have also been alleged to violate false claims laws.

The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created additional federal criminal and civil statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.

As with the federal Anti-Kickback Statute, the ACA amended the intent standard for certain healthcare fraud under HIPAA such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it to have committed a violation.

In addition, we may be subject to data privacy and security regulations promulgated by both the federal government and the states in which we conduct our business.

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, impose certain requirements on covered entities (i.e., certain healthcare providers, health plans and healthcare clearinghouses) relating to the privacy, security and transmission of individually identifiable health information.

Among other things, HITECH makes HIPAA’s security standards directly applicable to business associates, independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity.

HITECH also created four new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’

fees and costs associated with pursuing federal civil actions.

What is more, the federal Physician Payments Sunshine Act, created under the ACA, and its implementing regulations, require certain manufacturers of drugs, devices, biologicals and medical supplies for which payment is available under Medicare, Medicaid or the children’s health insurance program (with certain exceptions) to annually report information related to certain payments or other transfers of value provided to covered recipients, including physicians, as defined by such law, and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals’

covered recipients and information related to certain ownership and investment interests held by physicians and their immediate family members.

The majority of states also have statutes or regulations similar to the aforementioned federal laws, some of which are broader in scope and apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.

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.

In addition, some state laws require drug manufacturers to report information related to payments to clinicians and other healthcare providers or marketing expenditures and drug pricing.

Further, some state and local laws require the licensure of pharmaceutical sales representatives.

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.

Finally, in Europe, the European Union General Data Protection Regulation (2016/679) (“GDPR”) contains provisions specifically directed at the processing of health information.

The GDPR provides for potentially significant sanctions and contains extraterritoriality measures intended to bring non-EU companies under the regulation.

In addition to the GDPR, individual countries in Europe and elsewhere in the world have enacted similar data privacy legislation.

This legislation imposes increased compliance obligations and regulatory risk, including the potential for significant fines for noncompliance.

Healthcare and Other Reform

In the United States, there have been and continue to be a number of significant legislative initiatives to contain healthcare costs.

Federal and state governments continue to propose and pass legislation designed to reform delivery of, or payment for, healthcare, which include initiatives to reduce the cost of healthcare.

For example, in March 2010, the United States Congress enacted the ACA, which expanded health care coverage through Medicaid expansion and the implementation of the individual mandate for health insurance coverage and which included changes to the coverage and reimbursement of drug products under government healthcare programs.

Under the Trump administration, there were ongoing efforts to modify or repeal all or certain provisions of the ACA.

For example, tax reform legislation was enacted at the end of 2017 that eliminated the tax penalty established under the ACA for individuals who do not maintain mandated health insurance coverage beginning in 2019.

The ACA has also been subject to judicial challenge.

In December 2018, a federal district court, in a challenge brought by a number of state attorneys general, found the ACA unconstitutional in its entirety because, once Congress repealed the individual mandate provision, there was no longer a basis to rely on Congressional taxing authority to support enactment of the law.

In December 2019, the federal appellate court upheld the district court ruling that the individual mandate was unconstitutional and remanded the case back to the district court to determine whether the remaining provisions of the ACA are invalid as well.

The case has been appealed to the U.S.

Supreme Court where a ruling remains pending.

There were other reform initiatives under the former Trump Administration, including initiatives focused on drug pricing.

For example, the Bipartisan Budget Act of 2018 contained various provisions that affect coverage and reimbursement of drugs, including an increase in the discount that manufacturers of Medicare Part D brand name drugs must provide to Medicare Part D beneficiaries during the coverage gap from 50% to 70% starting in 2019.

As another example, in 2018, President Trump and the Secretary of the HHS, released a “blueprint”

to lower prescription drug prices and out-of-pocket costs.

Certain proposals in the blueprint, and related drug pricing measures proposed since the blueprint, could cause significant operational and reimbursement changes for the pharmaceutical industry.

HHS has solicited feedback on some of these measures and, at the same, has implemented others under its existing authority.

On November 20, 2020, CMS issued an interim final rule through the CMS Innovation Center whereby Medicare Part B reimbursement for “certain high-cost prescriptions drugs”

would be no more than most-favored-nation price (i.e., the lowest price) after adjustments, for a pharmaceutical product that the drug manufacturer sells in a member country of the Organization for Economic Cooperation and Development that has a comparable per-capita gross domestic product.

On December 28, 2020, the United States District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule.

While some of these and other measures may require additional authorization to become effective, members of Congress and the new Biden administration have indicated that lowering prescription drug prices is a priority, but it is not yet clear what steps the Biden Administration will take or whether such steps will be successful.

There have also been recent state legislative efforts to address drug costs, which generally have focused on increasing transparency around drug costs or limiting drug prices and address price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

In 2019, the DISARM Act of 2019 was introduced in Congress as new legislation to provide financial incentives for pharmaceutical companies to develop new antibiotics.

This new legislation was guided by input from the IDSA and will help to ensure that patients can access new antibiotics when they are clinically appropriate, require hospitals to establish antibiotic stewardship programs, and spur improved reporting of antibiotic use and resistance to more rapidly identify challenges and inform best practices.

More recently, this legislation was reintroduced in the U.S.

House of Representatives in June 2021 which aims to amend title XVIII of the Social Security Act to encourage the development and use of DISARM antimicrobial drugs, and for other purposes.

General legislative cost control measures may also affect reimbursement for our product candidates.

The Budget Control Act, as amended, resulted in the imposition of 2% reductions in Medicare, but not Medicaid, payments to providers in 2013 and will remain in effect through 2029 unless additional Congressional action is taken.

There was a temporary suspension of the 2% reduction during the pandemic;

that temporary suspension is scheduled to expire on March 31, 2021.

Any significant spending reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs that may be implemented and/or any significant taxes or fees that may be imposed on us could have an adverse impact on our results of operations.

Legislation was introduced to the U.S.

Senate in September 2020 which aims to reinvigorate innovation for the development of new antibiotics through a subscription contract program managed by HHS.

The PASTEUR Act was introduced to provide a mechanism for funding designated ‘critical need antimicrobial’

drugs post FDA approval.

In return, patients covered by federal insurance programs will receive these drugs at no cost.

These Contracts under the PASTEUR Act could range from $750 million to $3 billion in value.

It is unclear when or if the PASTEUR Act or similar incentive programs will become law.

In October 2021, the PACCARB authored a letter to the Honorable Xavier Becerra, Secretary, Department of Health and Human Services recommending the passage of both DISARM and PASTEUR and the antimicrobial stewardship provisions contained within each act.

Adoption of new legislation at the federal or state level could affect demand for, or pricing of, our current or future products if approved for sale.

We cannot, however, predict the ultimate content, timing or effect of any changes to the ACA or other federal and state reform efforts.

There is no assurance that federal or state health care reform will not adversely affect our future business and financial results.

Other Laws and Regulations

We are subject to a variety of financial disclosure and securities trading regulations as a public company in the U.S., including laws relating to the oversight activities of the U.S.

Securities and Exchange Commission (“SEC”) and the regulations of the Nasdaq Capital Market, on which our shares of common stock are traded.

We are also subject to various laws and regulations relating to safe working conditions, laboratory practices and the experimental use of animals.

Intellectual Property

Our commercial success depends in part on our ability to obtain and maintain proprietary or intellectual property protection for our product candidates, our core technologies, and other know-how.

To accomplish this we rely on the skills, knowledge and experience of our scientific and technical personnel, as well as that of our advisors, consultants and other contractors.

To help protect our proprietary know-how that is not patentable, we rely on trade secret protection and confidentiality agreements to protect our interests.

We require our employees, consultants and advisors to enter into confidentiality agreements prohibiting the disclosure of confidential information and requiring disclosure and assignment to us of the ideas, developments, discoveries and inventions important to our business.

We file patent applications directed to our key product candidates to establish intellectual property positions.

These patent applications are intended to protect new chemical entities relating to these product candidates as well as their manufacturing processes, intermediates and uses in the treatment of diseases.

The intellectual property portfolios for our commercial products, advanced product candidates, and various compounds are summarized below.

As of February 15, 2023 , the licensed intellectual property portfolio relating to GIAPREZA ® included 12 issued U.S.

patents, 2 pending U.S.

patent applications, 8 issued foreign patents and 15 pending foreign patent applications.

The issued U.S.

patents, and patents that may issue from the pending U.S.

patent applications, will expire between 2029 and 2034, absent any disclaimers, extensions, or adjustments of patent term.

The foreign patents, and patents that may issue from the pending foreign patent applications, will expire in 2034, absent any disclaimers, extensions, or adjustments of patent term.

As of February 15, 2023, the intellectual property portfolio relating to GIAPREZA included 3 issued U.S.

patents, 8 pending U.S.

patent applications, 7 issued foreign patents and 10 pending foreign patent applications.

The issued U.S.

patents, and patents that may issue from the pending U.S.

patent applications, will expire between 2034 and 2044, absent any disclaimers, extensions, or adjustments of patent term.

The foreign patents, and patents that may issue from the pending foreign patent applications, will expire between 2034 and 2044, absent any disclaimers, extensions, or adjustments of patent term.

As of February 15, 2023, we owned 2 issued U.S.

patents, 1 pending U.S.

patent application, 17 issued foreign patents and 4 pending foreign patent applications relating to XERAVA.

The issued U.S.

patents, and the patent that may issue from the pending U.S.

patent application, will have an expiration date of August 7, 2029, absent any disclaimers, extensions, or adjustments of patent term.

The term of 1 of the U.S.

patents has received 508 days of patent term adjustment.

The foreign patents, and patents that may issue from the pending foreign applications, will likewise have an expiration date of August 7, 2029, absent any disclaimers, extensions, or adjustments of patent term.

As of February 15, 2023, we also filed applications for Supplementary Protection Certificates based on European Patent No.

2323972 covering the composition of matter and use of XERAVA.

Some applications have been granted and others are pending.

In addition, as of February 15, 2023, we also owned 2 issued U.S.

patent, 1 pending U.S.

patent application and 11 pending foreign patent applications that relate to crystalline forms of eravacycline, any U.S.

patent that may issue from the pending patent application will expire in 2037 absent any disclaimers, extensions, or adjustments of patent term.

Likewise, any foreign patents that may issue from the pending foreign patent applications will expire in 2037.

We also owned 5 issued U.S.

patents, 1 pending U.S.

patent application, 32 issued foreign patents and 17 pending foreign patent applications relating to other tetracycline-related intellectual property.

United States

Our intellectual property portfolio for our durlobactam program contains patent applications directed to compositions of matter for durlobactam and other chemical analogs, as well as methods of making, referred to as synthetic methods, and methods of use and modes of treatment using durlobactam in combination with one or more antibiotic compounds.

As of February 15, 2023, we owned four issued U.S.

patents, one pending provisional application, one pending PCT application, 107 issued foreign patents as well as six pending foreign patent applications, of which two are allowed.

The issued foreign patents are in several jurisdictions including Australia, the European Union, Canada, China, Hong Kong, Israel, India, Japan, Macau, Mexico, New Zealand, the Philippines, the Russian Federation, Singapore, South Africa, South Korea, Taiwan and the United Kingdom.

and foreign patents and patents issuing from pending U.S.

and foreign applications will have expiration dates of April 2033 and April 2043.

Our intellectual property portfolio for zoliflodacin contains patent applications directed to compositions of matter for zoliflodacin and other chemical analogs, as well as synthetic methods and methods of use and modes of treatment.

As of February 15, 2023, we owned seven issued U.S.

patents, 74 issued foreign patents as well as two pending foreign patent applications.

The issued foreign patents are in several jurisdictions, including Australia, Brazil, Canada, China, Eurasia, the European Union, Hong Kong, India, Israel, Japan, Mexico, New Zealand, Philippines, Singapore, South Africa, South Korea, Taiwan and the United Kingdom.

and foreign patents and patents issuing from pending U.S.

and foreign applications have expiration dates of October 2029, January 2034 and May 2035.

Trademarks, Trade Secrets and Know-How

Our trademark portfolio currently consists of various registered trademark and service mark rights in several jurisdictions, including the United States, the European Union, Japan, Argentina, Australia, Brazil, Canada, India, Mexico, Norway, the Russian Federation, South Korea, Switzerland, Taiwan, Turkey and the United Kingdom, and pending applications in other jurisdictions.

In connection with the ongoing development and advancement of our products and services in the United States and various international jurisdictions, we routinely seek to create protection for our marks and enhance their value by pursuing trademarks and service marks where available and when appropriate.

In addition to patents and trademark protection, we rely upon unpatented trade secrets and know-how and continuing technological innovation to develop and maintain our competitive position.

We seek to protect our proprietary information, in part, using confidentiality agreements with our commercial partners, collaborators, employees, and consultants, and invention assignment agreements with our employees.

These agreements are designed to protect our proprietary information and, in the case of the invention assignment agreements, to grant us ownership of technologies that are developed through a relationship with a third party.

These agreements may be breached, and we may not have adequate remedies for any breach.

In addition, our trade secrets may otherwise become known or be independently discovered by competitors.

To the extent that our commercial partners, collaborators, employees, and consultants use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.

Our Strategic Partnership with Sarissa Capital

Strategic Advisory Agreement

us in the development and execution of our acquisition strategy intended to diversify our assets and the potential sources of revenue.

Sarissa Capital is considered to be a related party due to its investment in Innoviva and its representation on our board of directors.

Partnership Agreement

The general partner of the Partnership is an affiliate of Sarissa Capital and, pursuant to an investment management agreement, Sarissa Capital acts as the investment adviser to the Partnership.

Strategic Partners made a $300 million initial contribution to the Partnership.

The Partnership was formed for the purposes of investing in equity securities in the healthcare, pharmaceutical and biotechnology industries.

In May 2021, Strategic Partners received a distribution of $110.0 million from the Partnership to provide funding to us for a strategic repurchase of shares held by GSK.

A $110.0 million contribution was made during the first quarter of 2022.

Human Capital

As of December 31, 2022, we had 101 employees, all of whom were full-time employees.

None of our employees are represented by a labor union or covered by a collective bargaining agreement, and we consider our relations with our employees to be good.

We also hire consultants and contract with third parties, as needed, to provide additional resources to support our business activities.

Our key human capital management objectives are to identify, recruit, integrate, retain and motivate our new and existing employees.

We believe that our compensation and benefit programs are appropriately designed to attract and retain qualified talent.

Employees receive an annual base salary and are eligible to earn performance-based cash bonuses.

To create and maintain a successful work environment, we offer a comprehensive package of additional benefits that support the physical and mental health and wellness of all of our employees and their families and flexible working arrangements.

Additionally, we grant equity awards in order to allow employees to share in the performance of the Company.

The Chief Executive Officer regularly updates our board of directors and our committees on the operation and status of these human capital trends and activities.

Diversity, Equity and Inclusion

We have created an environment that fosters individual development while maintaining consistency in our corporate values and code of conduct.

We offer seminars from external resources on diversity, equity and inclusion, or DEI, best practices and promote the fair treatment and full participation of all people in our workplace.

Health, Safety and Wellness

We strive to provide pay, benefits and other employee services that are competitive to market in the life sciences industry and create incentives to attract and retain employees.

Our compensation package includes market-competitive pay, stock options and restrictive stock units, bonuses, employee spot awards, health care and retirement benefits, paid time off and family leave.

We utilize third party consultants to review and update our compensation practices annually.

We are also committed to the continued development of our people, providing opportunities for employees to further their career development through internal training and education programs and third party online training programs.

Information about our Executive Officers

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Item 1. Business