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Item 1. Business

2023-03-29 compared with 2022-03-30 · 897 added, 1700 removed, 122 unchanged (96% of the section changed)

the context requires otherwise, references in this Annual Report on Form 10-K to “Aerovate”, “we”, “us”

and “our” refer to Aerovate Therapeutics, Inc.

are a clinical stage biopharmaceutical company focused on developing drugs that meaningfully improve the lives of patients with rare

cardiopulmonary disease.

Our initial focus is on advancing AV-101, our dry powder inhaled formulation of imatinib for the treatment of

pulmonary arterial hypertension, or PAH, a devastating disease impacting approximately 70,000 people in the United States and Europe.

Unless the context requires otherwise, references in this Annual Report on Form 10-K to “Aerovate”, “we”, “us” and “our” refer to Aerovate Therapeutics, Inc.

We are a clinical-stage biopharmaceutical company focused on developing drugs that meaningfully improve the lives of patients with rare cardiopulmonary disease.

Our initial focus is on advancing AV-101, our dry powder inhaled formulation of imatinib for the treatment of pulmonary arterial hypertension, or PAH, a devastating disease impacting approximately 70,000 people in the United States and Europe.

Imatinib, marketed as Gleevec tablets, was originally developed for the treatment of multiple cancers.

Oral imatinib also demonstrated

statistically significant improvement on the primary endpoint, six-minute walk distance, and multiple secondary hemodynamic endpoints

in PAH patients in an international Phase 3 trial conducted by Novartis but was poorly tolerated due to adverse events, or AEs, and never

approved for the treatment of PAH.

AV-101, delivered using a dry powder inhaler, is designed to provide lung concentrations at or above

those observed with the oral dose while limiting systemic levels of the drug.

We have completed a Phase 1 study in healthy volunteers

and AV-101 was generally well-tolerated with no serious adverse events reported.

We announced the initiation of Inhaled iMatinib

Pulmonary Arterial Hypertension Clinical Trial (IMPAHCT), our Phase 2b/Phase 3 trial of AV-101 in PAH patients in December 2021,

and we have assembled a team with deep expertise in developing innovative PAH and inhaled therapies and commercializing novel drugs.

is an orphan disease with unmet medical need and is characterized by high pressure in the vessels transporting blood from the right side

of the heart to the lungs.

This high pressure is caused by abnormal cellular proliferation, which over time results in narrowing of the

pulmonary vessels and forces the heart to work harder to pump blood through the lungs.

The severe blood flow restriction and strain on

the heart becomes increasingly severe over time and ultimately leads to heart failure that is often fatal.

We estimate there are between

30,000-40,000 patients treated with approved PAH therapies in the U.S.

Oral imatinib also demonstrated statistically significant improvement on the primary endpoint, six-minute walk distance, and multiple secondary hemodynamic endpoints in PAH patients in an international Phase 3 trial conducted by Novartis but was poorly tolerated due to adverse events, or AEs, and never approved for the treatment of PAH.

AV-101, delivered using a dry powder inhaler, is designed to provide lung concentrations at or above those observed with the oral dose while limiting systemic levels of the drug.

We have completed a Phase 1 clinical trial in healthy volunteers and AV-101 was generally well-tolerated with no serious adverse events reported.

We are enrolling patients in Inhaled iMatinib Pulmonary Arterial Hypertension Clinical Trial (IMPAHCT), our global Phase 2b/Phase 3 trial of AV-101 in adults with PAH, and we have assembled a team with deep expertise in developing innovative PAH and inhaled therapies and commercializing novel drugs.

PAH is an orphan disease with unmet medical need and is characterized by high pressure in the vessels transporting blood from the right side of the heart to the lungs.

This high pressure is caused by abnormal cellular hyperproliferation and resistance to apoptosis, driven by improper signaling in cells of the distal pulmonary arteries, which over time results in narrowing of the pulmonary vessels and forces the heart to work harder to pump blood through the lungs.

The severe blood flow restriction and strain on the heart becomes increasingly severe over time and ultimately leads to heart failure that is often fatal.

We estimate there are between 30,000-40,000 patients treated with approved PAH therapies in the U.S.

alone, many of whom are on two or more approved PAH therapies.

It is estimated that the combined global sales for PAH products in 2022 was $6.1 billion.

Despite the availability of multiple

approved therapies, PAH has a five-year survival rate for newly diagnosed and prevalent patients between 61% and 65%.

None of the approved

therapies directly address the abnormal cellular proliferation of the pulmonary vasculature that causes the increased resistance to blood

We believe that novel treatments that primarily address abnormal cellular proliferation may provide therapeutic benefit to PAH

patients and lead to improved quality of life.

focus on developing AV-101 is driven by historical results from the Phase 3 IMPRES clinical trial of oral imatinib for the treatment

of PAH patients.

Oral imatinib is a well-characterized targeted kinase inhibitor and approved oncology treatment, but clinical trials

also supported its potential for the treatment of PAH.

The Phase 3 IMPRES trial was a placebo-controlled clinical trial of oral imatinib,

conducted globally by Novartis, in 202 PAH patients whose disease was not adequately controlled by two or all three classes of approved

PAH therapies.

After 24 weeks of treatment with oral imatinib, patients achieved on average an increase of 32 meters (p=0.002) compared

to placebo in the distance they could walk in six minutes, a measure known as the 6MWD.

A key secondary endpoint in the IMPRES trial

was pulmonary vascular resistance, or PVR, which is an objective measure of hemodynamic disease severity in PAH patients.

After 24 weeks

of treatment with oral imatinib, patients achieved an average PVR improvement (reduction) of 32% (p<0.001) compared to placebo with

a significant increase in cardiac output (p<0.001).

The magnitude of improvement in both 6MWD and PVR is notable because no other

PAH drug has shown such an improvement in a Phase 3 trial on top of at least two background therapies.

However, treatment with oral imatinib

was also associated with significant tolerability issues and adverse events, including nausea, edema, diarrhea and vomiting.

taking oral imatinib also experienced serious adverse events, the most frequent of which were anemia (7%), worsening of pulmonary hypertension

(6%), dyspnea (6%), peripheral edema (6%), presyncope (5%), diarrhea (3%), device-related infection (3%), subdural hematoma (2%) and

syncope (1%).

Despite the clinical effects of oral imatinib 26% of patients on oral imatinib, compared to 7% on placebo, discontinued

due to AEs by 24 weeks.

company was formed to develop an inhaled formulation of imatinib as a means of delivering therapeutically relevant drug concentrations

to the lungs while minimizing systemic exposure, which we believe is the source of the observed intolerability of oral imatinib.

brought together leaders both in the field of PAH drug development as well as in the area of inhaled drug formulation to invent AV-101,

a drug/device combination designed to deliver imatinib directly to the lungs.

We have completed a Phase 1 trial of AV-101 in 82 healthy

Repeat inhaled doses of up to 90 mg were well-tolerated and resulted in systemic plasma levels that were below those observed

with the 400 mg oral dose of imatinib (Gleevec) used in the IMPRES trial.

According to pharmacokinetic models of lung exposure to imatinib

as applied to our Phase 1 dose range, the predicted lung concentrations of imatinib delivered by AV-101 overlapped or surpassed those

predicted from the 400 mg dose of oral imatinib in our Phase 1 trial.

Despite the availability of multiple approved therapies, PAH has a five-year survival rate for newly diagnosed and prevalent patients between 61% and 65%.

None of the approved therapies directly address the abnormal cellular hyperproliferation of the pulmonary vasculature that causes the increased resistance to blood flow.

We believe that novel treatments that primarily address abnormal cellular hyperproliferation may provide therapeutic benefit to PAH patients and lead to improved quality of life.

Our focus on developing AV-101 is driven by historical results from the Phase 3 IMPRES clinical trial of oral imatinib for the treatment of PAH patients.

Oral imatinib is a well-characterized targeted kinase inhibitor and approved oncology treatment, but clinical trials also supported its potential for the treatment of PAH.

The Phase 3 IMPRES trial was a placebo-controlled clinical trial of oral imatinib, conducted globally by Novartis, in 202 PAH patients whose disease was not adequately controlled by two or all three classes of approved PAH therapies.

After 24 weeks of treatment with oral imatinib, patients achieved on average an increase of 32 meters (p=0.002) compared to placebo in the distance they could walk in six minutes, a measure known as the 6MWD.

A key secondary endpoint in the IMPRES trial was pulmonary vascular resistance, or PVR, which is an objective measure of hemodynamic disease severity in PAH patients.

After 24 weeks of treatment with oral imatinib, patients achieved an average PVR improvement (reduction) of 32% (p<0.001) compared to placebo with a significant increase in cardiac output (p<0.001).

The magnitude of improvement in both 6MWD and PVR is notable because no approved PAH drug has shown such an improvement in a Phase 3 trial on top of at least two background therapies.

However, treatment with oral imatinib was also associated with significant tolerability issues and adverse events, including nausea, edema, diarrhea and vomiting.

Patients taking oral imatinib also experienced serious adverse events, the most frequent of which were anemia (7%), worsening of pulmonary hypertension (6%), dyspnea (6%), peripheral edema (6%), presyncope (5%), diarrhea (3%), device-related infection (3%), subdural hematoma (2%) and syncope (1%).

Despite the clinical effects of oral imatinib 26% of patients on oral imatinib, compared to 7% on placebo, discontinued due to AEs by 24 weeks.

Our company was formed to develop an inhaled formulation of imatinib as a means of delivering therapeutically relevant drug concentrations to the lungs while minimizing systemic exposure, which we believe is the source of the observed intolerability of oral imatinib.

We have brought together leaders both in the field of PAH drug development as well as in the area of inhaled drug formulation to invent AV-101, a drug/device combination designed to deliver imatinib directly to the lungs.

We have completed a Phase 1 clinical trial of AV-101 in 82 healthy adults.

Repeat inhaled doses of up to 90 mg were well-tolerated and resulted in systemic plasma levels that were below those observed with the 400 mg oral dose of imatinib (Gleevec) used in the IMPRES trial.

According to pharmacokinetic models of lung exposure to imatinib as applied to our Phase 1 dose range, the predicted lung concentrations of imatinib delivered by AV-101 overlapped or surpassed those predicted from the 400 mg dose of oral imatinib in our Phase 1 clinical trial.

There were no serious adverse events associated with AV-101.

most common adverse event was a transient cough primarily in the highest dose cohort, which was generally mild, and resolved within 30

minutes of dosing.

The most common adverse event was a transient cough primarily in the highest dose cohort, which was generally mild, and resolved within 30 minutes of dosing.

There were no discontinuations due to cough.

The intended Phase 2b dose range with AV-101 will only include doses

that use 40% or less of the amount of dry powder that was inhaled at the highest Phase 1 dose and, based on the results of our Phase

1 trial and our modeling, we expect lung concentrations of imatinib delivered by AV-101 in the 35 mg and 70 mg doses, both twice a day,

or BID, selected for the Phase 2b portion of our Phase 2b/Phase 3 trial to overlap or surpass the lung concentrations predicted with

the 400 mg oral dose in our Phase 1 trial, which was the same target dose used in the Phase 3 IMPRES trial.

December 2021, we announced the initiation of IMPAHCT, our global double-blinded, placebo-controlled, randomized Phase 2b/Phase 3 trial

of AV-101 in PAH patients taking at least two background therapies.

The Phase 2b portion of this trial will enroll approximately 200

PAH patients and is designed to assess safety, tolerability and inform dose selection for the Phase 3 portion using changes in PVR, an

objective measure of the effect of AV-101 on hemodynamic function in PAH patients, as the primary endpoint.

We will measure 6MWD as a

secondary endpoint in the Phase 2b portion of this trial.

We anticipate that topline data from the Phase 2b portion of this trial will

be available in the middle of 2023.

The intended Phase 2b dose range with AV-101 will only include doses that use 40% or less of the amount of dry powder that was inhaled at the highest Phase 1 dose and, based on the results of our Phase 1 clinical trial and our modeling, we expect lung concentrations of imatinib delivered by AV-101 in the 35 mg and 70 mg doses, both twice a day, or BID, selected for the Phase 2b portion of our Phase 2b/Phase 3 trial to overlap or surpass the lung concentrations predicted with the 400 mg oral dose in our Phase 1 clinical trial, which was the same target dose used in the Phase 3 IMPRES trial.

In December 2021, we announced the initiation of IMPAHCT, our global double-blinded, placebo-controlled, randomized Phase 2b/Phase 3 trial of AV-101 in adults with PAH taking at least two background therapies.

We are enrolling patients in the Phase 2b portion of this trial and will enroll approximately 200 PAH patients.

The Phase 2b portion of the trial is designed to assess safety, tolerability and inform dose selection for the Phase 3 portion using changes in PVR, an objective measure of the effect of AV-101 on hemodynamic function in PAH patients, as the primary endpoint.

We will measure 6MWD as a secondary endpoint in the Phase 2b portion of this trial.

We anticipate that topline data from the Phase 2b portion of this trial will be available in the fourth quarter of 2023 or first quarter of 2024.

In the Phase 3 portion of the trial improvement in 6MWD will be the primary endpoint.

If the results

of the Phase 3 trial show a statistically significant increase in 6MWD, we plan to submit a New Drug Application, or NDA, with the United

States Food and Drug Administration, or FDA, and Marketing Authorization Application, or MAA, with the European Commission for AV-101

for the treatment of PAH.

These applications will leverage the existing safety data for Gleevec oral tablets allowing the company to

save time and money.

If AV-101 is approved, we believe it has the potential to become an important addition to existing therapies for

PAH in both the United States and Europe.

are pursuing a clinical development program utilizing established endpoints for development of previous PAH drugs, as well as enrollment

criteria and dosing duration previously studied in oral imatinib PAH trials.

At our April 14, 2021 end-of-Phase 1 meeting with the FDA,

we received regulatory guidance that our clinical program could support a NDA submission;

however, the process of clinical development

is inherently uncertain and there can be no guarantee that we will obtain marketing approval.

AV-101 has been granted orphan drug designation

by the FDA and the EMA for the treatment of PAH.

We have filed for patent protection of the composition of the aerosol, drug product,

manufacturing and methods of use.

If the results of the Phase 3 trial show a statistically significant increase in 6MWD, we plan to submit a New Drug Application, or NDA, with the United States Food and Drug Administration, or FDA, and Marketing Authorisation Application, or MAA, with the European Commission for AV-101 for the treatment of PAH.

These applications will leverage the existing safety data for Gleevec oral tablets allowing the company to save time and money.

If AV-101 is approved, we believe it has the potential to become an important addition to existing therapies for PAH in both the United States and Europe.

We are pursuing a clinical development program utilizing established endpoints for development of previous PAH drugs, as well as enrollment criteria and dosing duration previously studied in oral imatinib PAH trials.

At our April 14, 2021 end-of-Phase 1 meeting with the FDA, we received regulatory guidance that our clinical program could support an NDA submission;

however, the process of clinical development is inherently uncertain and there can be no guarantee that we will obtain marketing approval.

AV-101 has been granted orphan drug designation by the FDA and the EMA for the treatment of PAH.

We own four issued U.S.

patents and several U.S.

and foreign patent applications for patent protection of the composition of the aerosol, drug product, manufacturing and methods of use.

We retain worldwide commercial rights to AV-101.

executive management team has extensive experience in the clinical development and the commercialization of orphan drug indications.

Noyes, our Chief Executive Officer, was a senior executive at GelTex Pharmaceuticals, Inc., or GelTex, and Genzyme Corporation,

or Genzyme, where he headed all launch planning and the commercialization of Renagel, a treatment for hemodialysis patients that resulted

in Genzyme’s acquisition of GelTex for more than $1 billion.

Dake, Ph.D., our Founder, President, Chief Operating Officer

and Secretary, a cancer biologist, investor and entrepreneur, recognized the potential benefits of developing a lung-targeted imatinib

and secured multiple rounds of funding to build the team at Aerovate with experts like Ralph Niven, Ph.D., our Chief Development Officer,

who has over 30 years of expertise in translational medicine and inhalation dosage forms, and Hunter Gillies, M.B.Ch.B., our Chief

Medical Officer, who has led Phase 2 and Phase 3 PAH trials at Pfizer Inc., or Pfizer, and Gilead Sciences, Inc., or Gilead, and has

designed and executed PAH trials with several smaller biotechnology companies.

Eldridge, our Chief Financial Officer, has

served as CFO for several biotechnology companies, leading four of these companies to the public markets.

Marinus Verwijs, our Senior

Vice President of CMC, has over 15 years of product development and manufacturing experience.

He has worked on multiple commercial products,

leading them from clinical product development to NDA filing and commercial launch.

Timothy Pigot, our Senior Vice President of Commercial, has over 25 years

of industry experience working to launch and commercialize a range of products over multiple therapeutic areas.

Pigot gained significant

experience in PAH during his 12 years at Gilead and 11 years at Pfizer.

where his responsibilities included the launches of Revatio and

Letairis for the treatment of PAH.

Donna Dea, our Head of Regulatory Affairs, has over

30 years of global regulatory experience designing and implementing regulatory strategies resulting in the approval of treatments for

asthma, COPD, rhinitis and others, for which several of these drugs involved inhaled formulations.

believe that our company and AV-101 possess the following attributes that may potentially increase the likelihood that we will be successful

in developing and commercializing AV-101:

Significant efficacy of oral imatinib .

In the global Phase 3 IMPRES trial, oral imatinib demonstrated

statistically and clinically significant efficacy following 24 weeks of treatment on top of PAH standard of care.

These results were

notable for achieving statistically significant improvements in the study’s primary efficacy endpoint, 6MWD, and a key secondary

endpoint, PVR, but also for hitting statistical significance on other clinically relevant efficacy endpoints on top of standard of care,

which included at least two background PAH therapies.

The primary endpoint of the Phase 2b portion of our Phase 2b/Phase 3 trial is the

change in PVR following 24 weeks of treatment.

The primary endpoint of the Phase 3 portion of our Phase 2b/Phase 3 trial is the change

in 6MWD following 24 weeks of treatment.

Our Phase 2b/Phase 3 trial is designed to treat a similar patient population to the IMPRES trial,

patients in WHO Functional Classes II-IV taking at least two background PAH therapies.

Our executive management team has extensive experience in the clinical development and the commercialization of orphan drug indications.

Noyes, our Chief Executive Officer, was a senior executive at GelTex Pharmaceuticals, Inc., or GelTex, and Genzyme Corporation, or Genzyme, where he headed all launch planning and the commercialization of Renagel, a treatment for hemodialysis patients that resulted in Genzyme’s acquisition of GelTex for more than $1 billion.

Dake, Ph.D., our Founder, President, Chief Operating Officer and Secretary, a cancer biologist, investor and entrepreneur, recognized the potential benefits of developing a lung-targeted imatinib and secured multiple rounds of funding to build the team at Aerovate with experts like Ralph Niven, Ph.D., our Chief Development Officer, who has over 30 years of expertise in translational medicine and inhalation dosage forms, and Hunter Gillies, M.B.Ch.B., our Chief Medical Officer, who has led Phase 2 and Phase 3 PAH trials at Pfizer Inc., or Pfizer, and Gilead Sciences, Inc., or Gilead, and has designed and executed PAH trials with several smaller biotechnology companies.

Eldridge, our Chief Financial Officer, has served as CFO for several biotechnology companies, leading four of these companies to the public markets.

Marinus Verwijs, our Senior Vice President of CMC, has over 15 years of product development and

manufacturing experience.

He has worked on multiple commercial products, leading them from clinical product development to NDA filing and commercial launch.

Timothy Pigot, our Chief Commercial Officer, has over 25 years of industry experience working to launch and commercialize a range of products over multiple therapeutic areas.

Pigot gained significant experience in PAH during his 12 years at Gilead and 11 years at Pfizer, where his responsibilities included the launches of Revatio and Letairis for the treatment of PAH.

Donna Dea, our Head of Regulatory Affairs, has over 30 years of global regulatory experience designing and implementing regulatory strategies resulting in the approval of treatments for asthma, COPD, rhinitis and others, for which several of these drugs involved inhaled formulations.

Our Strengths

We believe that our company and AV-101 possess the following attributes that may potentially increase the likelihood that we will be successful in developing and commercializing AV-101:

● Significant efficacy for oral imatinib .

In the global Phase 3 IMPRES trial, oral imatinib demonstrated statistically and clinically significant efficacy following 24 weeks of treatment on top of PAH standard of care.

These results were notable for achieving statistically significant improvements in the study’s primary efficacy endpoint, 6MWD, and a key secondary endpoint, PVR, but also for hitting statistical significance on other clinically relevant efficacy endpoints on top of standard of care, which included at least two background PAH therapies.

The primary endpoint of the Phase 2b portion of our Phase 2b/Phase 3 trial is the change in PVR following 24 weeks of treatment.

The primary endpoint of the Phase 3 portion of our Phase 2b/Phase 3 trial is the change in 6MWD following 24 weeks of treatment.

Our Phase 2b/Phase 3 trial is designed to treat a similar patient population to the IMPRES trial, patients in WHO Functional Classes II-IV taking at least two background PAH therapies.

● Distinct PAH treatment mechanism .

Unlike all approved treatments for PAH, which act primarily through

vasodilation, AV-101 is designed to directly address the abnormal cellular proliferation in the pulmonary vasculature that causes the

increased resistance to blood flow and heart failure.

We believe AV-101’s mechanism uniquely positions our product candidate, if

approved, for combination therapy with existing vasodilator treatments.

Unlike all approved treatments for PAH, which act primarily through vasodilation, AV-101 is designed to directly address the abnormal cellular hyperproliferation in the pulmonary vasculature that causes the increased resistance to blood flow and heart failure.

We believe AV-101’s mechanism uniquely positions our product candidate, if approved, for combination therapy with existing vasodilator treatments.

● Adaptive development path .

We have planned an innovative Phase 2b/Phase 3 clinical trial based on

an adaptive design that could lead to a potential NDA filing.

Our development plan also benefits from our ability to leverage prior toxicology

work done with oral imatinib.

We have designed an innovative global Phase 2b/Phase 3 clinical trial based on an adaptive design that could lead to a potential NDA filing.

Our development plan also benefits from our ability to leverage prior toxicology work done with oral imatinib.

● Improved tolerability based on route of administration .

Our inhaled administration is designed to minimize systemic exposure and

limit the safety and tolerability concerns observed in the IMPRES trial of oral imatinib in PAH.

Our Phase 1 results in healthy volunteers

demonstrated that plasma levels of imatinib were lower than those observed with the 400 mg oral dose of imatinib used in the IMPRES trial.

Our inhaled administration is designed to minimize systemic exposure and limit the safety and tolerability concerns observed in the IMPRES trial of oral imatinib in PAH.

Our Phase 1 clinical trial results in healthy volunteers demonstrated that plasma levels of imatinib were significantly lower than those observed with the 400 mg oral dose of imatinib used in the IMPRES trial.

● Expected comparability of concentrations of drug delivered .

Based on the results of our Phase 1

trial and our modeling, we expect lung concentrations of imatinib delivered by AV-101 in the 35 mg and 70 mg doses, both BID, selected

for the Phase 2b portion of our Phase 2b/Phase 3 trial to overlap or surpass the lung concentrations predicted with the 400 mg oral dose

in our Phase 1 trial, which was the same target dose used in the Phase 3 IMPRES trial.

Based on the results of our Phase 1 clinical trial and our modeling, we expect lung concentrations of imatinib delivered by AV-101 in the 35 mg and 70 mg doses, both BID, selected for the Phase 2b portion of our Phase 2b/Phase 3 trial to overlap or surpass the lung concentrations predicted with the 400 mg oral dose in our Phase 1 clinical trial, which was the same target dose used in the Phase 3 IMPRES trial.

● Powerful barriers to entry .

We have generated strong intellectual property claims and other barriers

We own one issued U.S.

We have generated strong intellectual property claims and other barriers to entry.

We own four issued U.S.

patent and several U.S.

and foreign patent applications to protect our proprietary imatinib formulation,

our drug product and methods of use.

In addition, we have obtained exclusive access to a commercially available dry powder delivery device

which we believe will create a substantial competitive advantage.

and foreign patent applications to protect our proprietary imatinib formulation, our drug product and methods of use.

In addition, we have obtained exclusive access to a commercially available dry powder delivery device which we believe will create a substantial competitive advantage.

● Substantial and readily addressable market opportunity.

If AV-101 is approved, we believe there

is a substantial medical need and market opportunity for combining AV-101 with existing standard of care, which is often two or three

background agents.

Beyond this base case, we also believe that AV-101, if approved, could benefit a larger group of PAH patients with

earlier-stage disease such as those patients receiving only one other PAH therapy.

If AV-101 is approved, we believe there is a substantial medical need and market opportunity for combining AV-101 with existing standard of care, which is

often two or three background agents.

Beyond this base case, we also believe that AV-101, if approved, could benefit a larger group of PAH patients with earlier-stage disease such as those patients receiving only one other PAH therapy.

● Strong leadership in PAH .

Our executive management team has extensive experience in the clinical

development of treatments for PAH, including Dr.

Gillies who has been developing drugs for PAH for more than 20 years and recently

ran the AMBITION trial that established the current first-line PAH combination therapy and Dr.

Niven’s experience in manufacturing

and development for inhaled small molecules.

In addition, our Clinical Advisory Board includes several of the premier thought leaders

in PAH who have extensive experience developing drugs and caring for patients suffering from PAH.

strategy is to develop and commercialize AV-101 for patients suffering from PAH.

Our executive management team has extensive experience in the clinical development of treatments for PAH, including Dr.

Gillies who has been developing drugs for PAH for more than 20 years and recently ran the AMBITION trial that established the current first-line PAH combination therapy and Dr.

Niven’s experience in manufacturing and development for inhaled small molecules.

In addition, our Clinical Advisory Board includes several of the premier thought leaders in PAH who have extensive experience developing drugs and caring for patients suffering from PAH.

Our strategy is to develop and commercialize AV-101 for patients suffering from PAH.

Key elements of our strategy include our plans to:

● Complete regulatory discussions for AV-101 in the United States and Europe .

At our April 14, 2021

end-of-Phase 1 meeting with the FDA, we received regulatory guidance that our Phase 2b/Phase 3 trial, if successful, could support a

NDA submission using the change in 6MWD compared to placebo as the primary endpoint in the Phase 3 portion of the trial;

process of clinical development is inherently uncertain and there can be no guarantee that we will obtain marketing approval even if

we successfully achieve our primary endpoint.

We have been granted orphan designation for PAH from the FDA and from the European Commission

in the European Union.

We completed the formal process of seeking scientific advice and regulatory guidance from the European Medicines

Agency, or EMA, regarding its requirements for regulatory approval and we believe that, if successful, our existing clinical program

could support a marketing authorization application, or MAA submission for regulatory approval in Europe.

At our April 14, 2021 end-of-Phase 1 meeting with the FDA, we received regulatory guidance that our Phase 2b/Phase 3 trial, if successful, could support a NDA submission using the change in 6MWD compared to placebo as the primary endpoint in the Phase 3 portion of the trial;

however, the process of clinical development is inherently uncertain and there can be no guarantee that we will obtain marketing approval even if we successfully achieve our primary endpoint.

We have been granted orphan designation for the treatment of PAH from the FDA and from the European Commission in the European Union.

We completed the formal process of seeking scientific advice and regulatory guidance from the European Medicines Agency, or EMA, regarding its requirements for regulatory approval and we believe that, if successful, our existing clinical program could support a MAA submission for regulatory approval in Europe.

● Advance AV-101 through NDA submission .

In December 2021, we announced initiation of IMPAHCT, our

Phase 2b/Phase 3 trial of AV-101 in PAH patients taking at least two approved PAH therapies.

The Phase 2b portion of this trial will

be a dose-ranging trial in which PVR will be the primary endpoint.

The Phase 3 portion of the trial will be based on the optimal dose

selected in the Phase 2b portion and 6MWD will be the primary endpoint.

In December 2021, we announced initiation of IMPAHCT, our Phase 2b/Phase 3 trial of AV-101 in adults with PAH taking at least two approved PAH therapies.

The Phase 2b portion of this trial is enrolling patients and will be a dose-ranging trial in which PVR will be the primary endpoint.

The Phase 3 portion of the trial will be based on the optimal dose selected in the Phase 2b portion and 6MWD will be the primary endpoint.

● Commercialize AV-101 directly in the United States .

If AV-101 is approved by the FDA, we intend

to commercialize it ourselves in the United States with a specialty sales force focused primarily on pulmonologists and cardiologists

treating adult patients suffering from PAH.

We will consider entering into collaborations for the development and commercialization of

AV-101 in Europe, Asia or other geographic regions, if approved by foreign regulatory authorities.

If AV-101 is approved by the FDA, we intend to commercialize it ourselves in the United States with a specialty sales force focused primarily on pulmonologists and cardiologists treating adult patients suffering from PAH.

We will consider entering into collaborations for the development and commercialization of AV-101 in Europe, Asia or other geographic regions, if approved by foreign regulatory authorities.

● Pursue additional indications for AV-101 .

We believe that AV-101 could have clinical applications

in other groups of PAH patients, such as those with earlier-stage disease who may be receiving only one other PAH therapy.

consider the potential use of AV-101 in other types of pulmonary vascular disease.

We believe that AV-101 could have clinical applications in other groups of PAH patients, such as those with earlier-stage disease who may be receiving only one other PAH therapy.

We also may consider the potential use of AV-101 in other types of pulmonary vascular disease.

● Expand our pipeline by accessing additional product opportunities .

We plan to search for additional

product opportunities available for license or acquisition that could be supported by the commercial infrastructure we build to successfully

launch AV-101 in the United States if it is approved for marketing.

Background and Limitations of Current Treatments

is a progressive, life-threatening orphan disease characterized by increased pressure in the pulmonary arteries, vessels responsible

for carrying deoxygenated blood from the heart to the lungs.

This increased pressure is caused by narrowing of these blood vessels as

a result of dysregulation of cells of the arterial wall, leading to excessive growth and proliferation.

Over time, blood flow worsens

as inflammatory cells are recruited and inflammatory cytokines further stimulate the proliferation of blood vessel cells.

This ultimately

leads to tissue scarring, fibrosis and blood vessel remodeling, resulting in severe restriction of blood flow (as illustrated in the

figure below) and increased risk of developing blood clots and heart failure.

We plan to search for additional product opportunities available for license or acquisition that could be supported by the commercial infrastructure we build to successfully launch AV-101 in the United States if it is approved for marketing.

PAH Background and Limitations of Current Treatments

PAH is a progressive, life-threatening orphan disease characterized by increased pressure in the pulmonary arteries, vessels responsible for carrying deoxygenated blood from the heart to the lungs.

This increased pressure is caused by narrowing of these blood vessels as a result of dysregulation of cells of the arterial wall, leading to excessive growth and proliferation.

Over time, blood flow worsens as inflammatory cells are recruited and inflammatory cytokines further stimulate the

proliferation of blood vessel cells.

This ultimately leads to tissue scarring, fibrosis and blood vessel remodeling, resulting in severe restriction of blood flow (as illustrated in the figure below) and increased risk of developing blood clots and heart failure.

Increased pulmonary resistance is caused by cell proliferation that obstructs blood flow.

severe restriction of blood flow also causes the heart to work harder to circulate blood through the lungs causing abnormal strain on

the right ventricle of the heart resulting in PAH symptoms that worsen over time;

these commonly include breathlessness, fatigue, chest

pain, fainting or light headedness, as well as abdominal distension.

Four PAH functional classes categorize patient symptom severity

and ability to carry out physical activity.

Higher numbered functional classes indicate worsening symptoms and are associated with higher

This severe restriction of blood flow also causes the heart to work harder to circulate blood through the lungs causing abnormal strain on the right ventricle of the heart resulting in PAH symptoms that worsen over time;

these commonly include breathlessness, fatigue, chest pain, fainting or light headedness, as well as abdominal distension.

Four PAH functional classes categorize patient symptom severity and ability to carry out physical activity.

Higher numbered functional classes indicate worsening symptoms and are associated with higher mortality.

The four functional classes established by the World Health Organization, or WHO, are detailed in the figure below.

WHO PAH FUNCTIONAL CLASSES

limitation of physical activity, and ordinary physical activity does not cause undue dyspnea or fatigue, chest pain or near syncope.

limitation of physical activity, but patients are comfortable at rest.

Ordinary physical activity causes undue dyspnea or fatigue,

chest pain or near syncope.

limitation of physical activity, but patients are still comfortable at rest.

Less than ordinary activity causes undue dyspnea or

fatigue, chest pain or near syncope.

are unable to carry out any physical activity without symptoms, and discomfort is increased by any physical activity.

Signs of right

heart failure manifest, and dyspnea and/or fatigue may even be present at rest.

of PAH and Unmet Need

on third-party estimates, the number of PAH patients diagnosed is between 30,000 and 40,000 in the United States with an average age

at diagnosis of 53 years old and 65% to 80% of those diagnosed being women.

The exact prevalence of PAH worldwide is not known but it

has been estimated to be between 10 to 52 cases per million.

Many drugs have been developed and made commercially available for the treatment

of PAH, such as vasodilators, and it is estimated that the combined global sales for PAH products in 2021 was $5.9 billion.

While advances in the treatment of PAH using vasodilatory agents over the last two decades have markedly improved survival, PAH patients

still face significant disease burden and premature death.

The five-year survival rate for newly diagnosed and prevalent patients is

between 61% and 65%.

FUNCTIONAL CLASS

No limitation of physical activity, and ordinary physical activity does not cause undue dyspnea or fatigue, chest pain or near syncope.

Slight limitation of physical activity, but patients are comfortable at rest.

Ordinary physical activity causes undue dyspnea or fatigue, chest pain or near syncope.

Marked limitation of physical activity, but patients are still comfortable at rest.

Less than ordinary activity causes undue dyspnea or fatigue, chest pain or near syncope.

Patients are unable to carry out any physical activity without symptoms, and discomfort is increased by any physical activity.

Signs of right heart failure manifest, and dyspnea and/or fatigue may even be present at rest.

Prevalence of PAH and Unmet Need

Based on third-party estimates, the number of PAH patients diagnosed is between 30,000 and 40,000 in the United States with an average age at diagnosis of 53 years old and 65% to 80% of those diagnosed being women.

The exact prevalence of PAH worldwide is not known but it has been estimated to be between 10 to 52 cases per million.

Many drugs have been

developed and made commercially available for the treatment of PAH, such as vasodilators, and it is estimated that the combined global sales for PAH products in 2022 was $6.1 billion.

While advances in the treatment of PAH using vasodilatory agents over the last two decades have markedly improved survival, PAH patients still face significant disease burden and premature death.

The five-year survival rate for newly diagnosed and prevalent patients is between 61% and 65%.

Clearly there is unmet need for new therapies beyond the standard of care.

of Current Therapies for PAH

current standard of care in PAH consists of drugs that act primarily as pulmonary vasodilators, which relax the muscles in the pulmonary

arterial walls, thereby reducing the degree of blood vessel constriction.

Although the current standard of care provides some benefit

to patients, it is clear from the pathology of PAH that abnormal cellular proliferation causes progressive narrowing of the pulmonary

This abnormal proliferation is not addressed by therapies currently used to treat PAH.

classes of pulmonary vasodilators are currently used to treat PAH:

endothelin receptor antagonists, nitric oxide pathway modulators and

prostacyclins.

Limitations of Current Therapies for PAH

The current standard of care in PAH consists of drugs that act primarily as pulmonary vasodilators, which relax the muscles in the pulmonary arterial walls, thereby reducing the degree of blood vessel constriction.

Although the current standard of care provides some benefit to patients, it is clear from the pathology of PAH that abnormal cellular hyperproliferation causes progressive narrowing of the pulmonary vasculature.

This abnormal hyperproliferation is not addressed by therapies currently used to treat PAH.

Three classes of pulmonary vasodilators are currently used to treat PAH:

endothelin receptor antagonists, nitric oxide pathway modulators and prostacyclins.

● Endothelin Receptor Antagonists .

Some treatments currently approved for PAH work by blocking the action of endothelin-1, a potent

vasoconstrictor, and are referred to as endothelin receptor antagonists, or ERAs.

Some treatments currently approved for PAH work by blocking the action of endothelin-1, a potent vasoconstrictor, and are referred to as endothelin receptor antagonists, or ERAs.

These drugs include bosentan, macitentan and ambrisentan.

All three of these drugs are orally administered and improve blood flow to the lungs as determined by measures of hemodynamics such as

pulmonary vascular resistance and cardiac output, which translates to improvements in exercisability as measured by the distance that

patients can walk in a fixed period of time (6MWD).

All three of these drugs are orally administered and improve blood flow to the lungs as determined by measures of hemodynamics such as pulmonary vascular resistance and cardiac output, which translates to improvements in exercisability as measured by the distance that patients can walk in a fixed period of time (6MWD).

● Nitric oxide pathway modulators such as PDE5 inhibitors and sGC’s .

Nitric oxide is a naturally occurring molecule that is

widely recognized as important in a number of biological processes.

It causes blood vessels to relax and widen via the second messenger

cGMP, resulting in an increase in blood flow.

Nitric oxide is a naturally occurring molecule that is widely recognized as important in a number of biological processes.

It causes blood vessels to relax and widen via the second messenger cGMP, resulting in an increase in blood flow.

Two common modalities utilize the nitric oxide pathway to result in vasodilation:

Phosphodiesterase

type 5, or PDE5, inhibitors prevent the breakdown of cGMP and soluble guanylate cyclase stimulators, or sGC’s, increase the production

of cGMP independent of nitric oxide.

Phosphodiesterase type 5, or PDE5, inhibitors prevent the breakdown of cGMP and soluble guanylate cyclase stimulators, or sGC’s, increase the production of cGMP independent of nitric oxide.

Several oral PDE5 drugs are available, such as sildenafil and tadalafil.

Additionally, riociguat

is the only sGC approved for PAH.

Additionally, riociguat is the only sGC approved for PAH.

● Prostacyclin pathway modulators .

Patients with PAH have been shown to have reduced levels of prostacyclin,

a naturally occurring lipid that has the effect of relaxing the smooth muscles surrounding arteries, resulting in vasodilation.

analogues, such as iloprost and treprostinil, are approved therapies for PAH.

Selexipag is an oral prostacyclin-like drug approved for

Patients with PAH have been shown to have reduced levels of prostacyclin, a naturally occurring lipid that has the effect of relaxing the smooth muscles surrounding arteries, resulting in vasodilation.

Prostacyclin analogues, such as iloprost, epoprostenol, and treprostinil, are approved therapies for PAH.

Selexipag is an oral prostacyclin-like drug approved for PAH.

In addition to the challenges associated with dosing, prostacyclin therapy can be difficult to tolerate.

In clinical trials subcutaneous

infusion of these agents has shown severe infusion site adverse events requiring narcotics for these symptoms.

The oral prostacyclins

also have a high incidence of headache and diarrhea, nausea, vomiting, and flushing, which can lead to discontinuations.

patients are often treated with more than one of these drugs and new therapies are typically added to existing therapies rather than

replacing drugs that are providing insufficient benefit.

Based on both primary research and third party sources, we estimate that a majority

of patients are taking two or three FDA approved drugs for the treatment of PAH.

Oral therapies are commonly prescribed first-line, typically

consisting of an ERA and PDE5 inhibitor.

As patients progress in their disease severity, a prostacyclin can typically be added as a third

Although these therapies have been shown to improve exercise capacity, quality of life, pulmonary pressure and short-term survival,

none of the current treatments are curative and patients remain on life-long therapy with poor long-term prognosis.

Approach, AV-101

are developing AV-101 as a drug/device combination product that delivers imatinib directly to the lungs via inhalation.

The product consists

of capsules of particulate imatinib that will be used in conjunction with a dry powder inhaler device.

We believe that delivery of imatinib

directly to the lungs will maximize the amount of drug in the targeted tissues while minimizing systemic exposure.

Furthermore, we believe

that delivering imatinib in this way may improve the tolerability of treatment while maintaining imatinib’s known effects on exercise

capacity and hemodynamics.

AV-101 has been granted orphan drug designation by the FDA and the European Commission for the treatment of

of Imatinib to Treat PAH

molecule in AV-101, imatinib, has demonstrated improvement on the primary and multiple secondary endpoints in a global Phase 3 trial

(IMPRES) conducted by Novartis in PAH patients on top of at least two standard of care PAH drugs.

However, when administered orally,

serious adverse events, and discontinuations were high and the oral version was never approved for PAH.

We believe imatinib is unique

amongst tyrosine kinase inhibitors for its specificity and potency.

At pharmacologically achievable levels, it inhibits only a handful

of kinases, such as PDGFR, KIT, DDR and ABL, which have been implicated in PAH disease processes.

Other tyrosine kinase inhibitors that

target the same binding pocket are more promiscuous.

In clinical trials subcutaneous infusion of these agents has shown severe infusion site adverse events requiring narcotics for these symptoms.

The oral prostacyclins also have a high incidence of headache and diarrhea, nausea, vomiting, and flushing, which can lead to discontinuations.

PAH patients are often treated with more than one of these drugs and new therapies are typically added to existing therapies rather than replacing drugs that are providing insufficient benefit.

Based on both primary research and third party sources, we estimate that a majority of patients are taking two or three FDA approved drugs for the treatment of PAH.

Oral therapies are commonly prescribed first-line, typically consisting of an ERA and PDE5 inhibitor.

As patients progress in their disease severity, a prostacyclin can typically be added as a third agent.

Although these therapies have been shown to improve exercise capacity, quality of life, pulmonary pressure and short-term survival, none of the current treatments are curative and patients remain on life-long therapy with poor long-term prognosis.

Our Approach, AV-101

We are developing AV-101 as a drug-device combination product that delivers imatinib directly to the lungs via inhalation.

The product consists of capsules of particulate imatinib that will be used in conjunction with a dry powder inhaler device.

We believe that delivery of imatinib directly to the lungs will maximize the amount of drug in the targeted tissues while

minimizing systemic exposure.

Furthermore, we believe that delivering imatinib in this way may improve the tolerability of treatment while maintaining imatinib’s known effects on exercise capacity and hemodynamics.

AV-101 has been granted orphan drug designation by the FDA and the European Commission for the treatment of PAH.

Potential of Imatinib to Treat PAH

The molecule in AV-101, imatinib, has demonstrated improvement on the primary and multiple secondary endpoints in a global Phase 3 trial (IMPRES) conducted by Novartis in PAH patients on top of at least two standard of care PAH drugs.

However, when administered orally, serious adverse events, and discontinuations were high and the oral version was never approved for PAH.

We believe imatinib is unique amongst tyrosine kinase inhibitors for its specificity and potency.

At pharmacologically achievable levels, it inhibits only a handful of kinases, such as PDGFR, KIT, DDR and ABL, which have been implicated in PAH disease processes.

Other tyrosine kinase inhibitors that target the same binding pocket are more promiscuous.

Recent academic focus on kinase inhibition in PAH has been on PDGFR.

However, other

kinase inhibitors that hit PDGFR also inhibit the closely related SRC and VEGFR kinases.

These drugs have been shown to induce

or exacerbate PAH.

Thus, we believe clinical success with kinase inhibition in PAH is not dictated by inhibiting PDGFR

alone, but rather by the kinase inhibition.

We are encouraged that imatinib, the molecule in AV-101, has shown clinical effects

in the IMPRES trial, and we believe inhaled delivery of AV-101 limits systemic exposure and may mitigate the tolerability issues observed

with oral imatinib.

inhibitors have been approved for the treatment of various cancers.

Case reports of improvements in PAH in patients receiving oral imatinib,

marketed as Gleevec by Novartis, led to several clinical trials designed to test the efficacy of imatinib for PAH.

The IMPRES trial was

a randomized, double-blind global Phase 3 trial conducted by Novartis that enrolled 202 PAH patients.

Most of these patients had Functional

Class II or Class III PAH and were already on at least two background therapies.

Patients were randomized to receive oral imatinib or

placebo for 24 weeks.

enrolled in the IMPRES trial had reduced exercise capacity compared to healthy adults as measured by the six-minute walk distance, or

6MWD, a simple test that has been used as a primary endpoint for the approval of multiple drugs to treat PAH.

The mean baseline 6MWD

for patients in this trial was 361 meters, whereas for healthy adults it has been reported to be approximately 600 meters The baseline

6MWD values in these patients upon enrollment was below normal for healthy adults despite the fact that they were all on treatment with

at least two PAH therapies and 41% were on triple therapy, the maximal standard of care for PAH.

Patients remained on their respective

pre-trial PAH therapies throughout the trial.

target dose of oral imatinib in the IMPRES trial was 400 mg/day which is an approved dose of oral imatinib for the treatment of cancers

such as chronic myelogenous leukemia, or CML, and metastatic malignant gastrointestinal stromal tumors, or GIST, containing specific

genetic alterations.

Treatment of PAH patients with 400 mg oral imatinib led to a significant improvement in 6MWD over baseline compared

This difference was significant at 12 weeks with significance observed at all consecutive timepoints through the end

of the trial at 24 weeks, at which point the oral imatinib-treated patients achieved an average improvement of 32 meters vs placebo in

the 6MWD (p=0.002).

The magnitude of this improvement is notable because no other PAH drug has shown such an improvement in a Phase 3

trial on top of at least two background therapies.

The most recently approved oral PAH drug, Uptravi (Selexipag), showed a 12-meter treatment

effect in the Phase 3 GRIPHON trial.

The patients in this trial were not as heavily treated as those in the IMPRES trial, with one third

on double therapy and none on triple therapy.

The figure below shows the improvement over time in 6MWD of PAH patients treated with oral

imatinib on at least two standard of care therapies as compared to the placebo group in the Phase 3 IMPRES trial.

However, other kinase inhibitors that hit PDGFR also inhibit the closely related SRC and VEGFR kinases.

These drugs have been shown to induce or exacerbate PAH.

Thus, we believe clinical success with kinase inhibition in PAH is not dictated by inhibiting PDGFR alone, but rather by the overall kinase inhibition profile.

We are encouraged that imatinib, the molecule in AV-101, has shown clinical effects in the IMPRES trial, and we believe inhaled delivery of AV-101 limits systemic exposure and may mitigate the tolerability issues observed with oral imatinib.

Kinase inhibitors have been approved for the treatment of various cancers.

Case reports of improvements in PAH in patients receiving oral imatinib, marketed as Gleevec by Novartis, led to several clinical trials designed to test the efficacy of imatinib for PAH.

The IMPRES trial was a randomized, double-blind global Phase 3 trial conducted by Novartis that enrolled 202 PAH patients.

Most of these patients had Functional Class II or Class III PAH and were already on at least two background therapies.

Patients were randomized to receive oral imatinib or placebo for 24 weeks.

Patients enrolled in the IMPRES trial had reduced exercise capacity compared to healthy adults as measured by the six-minute walk distance, or 6MWD, a simple test that has been used as a primary endpoint for the approval of multiple drugs to treat PAH.

The mean baseline 6MWD for patients in this trial was 361 meters, whereas for healthy adults it has been reported to be approximately 600 meters The baseline 6MWD values in these patients upon enrollment was below normal for healthy adults despite the fact that they were all on treatment with at least two PAH therapies and 41% were on triple therapy, the maximal standard of care for PAH.

Patients remained on their respective pre-trial PAH therapies throughout the trial.

The target dose of oral imatinib in the IMPRES trial was 400 mg/day which is an approved dose of oral imatinib for the treatment of cancers such as chronic myelogenous leukemia, or CML, and metastatic malignant gastrointestinal stromal tumors, or GIST, containing specific genetic alterations.

Treatment of PAH patients with 400 mg oral imatinib led to a significant improvement in 6MWD over baseline compared to placebo.

This difference was significant at 12 weeks with significance observed at all consecutive timepoints through the end of the trial at 24 weeks, at which point the oral imatinib-treated patients achieved an average improvement of 32 meters vs placebo in the 6MWD (p=0.002).

The magnitude of this improvement is notable because no approved PAH drug has shown such an improvement in a Phase 3 trial on top of at least two background therapies.

The most recently approved oral PAH drug in the U.S., Uptravi (Selexipag), showed a 12-meter treatment effect in the Phase 3 GRIPHON trial.

The patients in this trial were not as heavily treated as those in the IMPRES trial, with one third on double therapy and none on triple therapy.

The figure below shows the improvement

over time in 6MWD of PAH patients treated with oral imatinib on at least two standard of care therapies as compared to the placebo group in the Phase 3 IMPRES trial.

Imatinib led to a significant increase in 6MWD on top of at least two standard of care therapies

improvement in 6MWD with oral imatinib treatment was observed across all patient subgroups regardless of treatment with other PAH therapies

(as seen in the figure below).

We believe this observation suggests that oral imatinib improved 6MWD through a mechanism that was independent

of patients’ background therapies.

Imatinib led to improvements in 6MWD compared to placebo regardless of patients being treated concurrently with at least two approved

PAH therapies

addition to improvements in 6MWD, patients treated with imatinib had greater improvements in multiple secondary endpoints, including

measures of hemodynamics.

Importantly, there was a significant improvement at 24 weeks in PVR (p<0.001), a measure of how difficult

it is for blood to circulate through the lungs.

Damaged pulmonary blood vessels make it more difficult for the heart to pump blood through

the lungs, leading to increased pulmonary arterial pressure, increased workload on the heart, and if not resolved, heart failure.

is frequently used as a quantitative measure in PAH Phase 2 trials to determine the appropriate dose for registrational Phase 3 trials

that directly measure changes in patient exercise capacity, such as 6MWD.

Patients treated with imatinib had a significant reduction

in PVR at 24 weeks, as noted in the blue box in the figure below.

PVR was virtually unchanged compared to baseline in placebo treated

Consistent with the improvements in PVR, significant improvements compared to placebo treated patients, as shown in the figure

below, were also observed in mean pulmonary artery pressure, or mPAP, which was decreased by 5.2 mm Hg;

cardiac output, or CO, which

was increased by 0.88 liter/min;

The improvement in 6MWD with oral imatinib treatment was observed across all patient subgroups regardless of treatment with other PAH therapies (as seen in the figure below).

We believe this observation suggests that oral imatinib improved 6MWD through a mechanism that was independent of patients’ background therapies.

Imatinib led to improvements in 6MWD compared to placebo regardless of patients being treated concurrently with at least two approved PAH therapies

In addition to improvements in 6MWD, patients treated with imatinib had greater improvements in multiple secondary endpoints, including measures of hemodynamics.

Importantly, there was a significant improvement at 24 weeks in PVR (p<0.001), a measure of how difficult it is for blood to circulate through the lungs.

Damaged pulmonary blood vessels make it more difficult for the heart to pump blood through the lungs, leading to increased pulmonary arterial pressure, increased workload on the heart, and if not resolved, heart failure.

PVR is frequently used as a quantitative measure in PAH Phase 2 trials to determine the appropriate dose for registrational Phase 3 trials that directly measure changes in patient exercise capacity, such as 6MWD.

Patients treated with imatinib had a significant reduction in PVR at 24 weeks, as noted in the blue box in the figure below.

PVR was virtually unchanged compared to baseline in placebo treated patients.

Consistent with the improvements in PVR, significant improvements compared to placebo treated patients, as shown in the figure below, were also observed in mean pulmonary artery pressure, or mPAP, which was decreased by 5.2 mm Hg;

cardiac output, or CO, which was increased by 0.88 liter/min;

and right arterial pressure, or RAP, which was decreased by 1.7 mm Hg.

An echocardiography sub-study

of 74 IMPRES patients showed that patients randomized to oral imatinib showed significant improvements in certain measures of right ventricle

function after 24 weeks compared with placebo.

Significant and consistent changes across hemodynamic and echo measures suggest a benefit

of imatinib for the treatment of PAH with the potential to result in long-term improvements in pulmonary and cardiac function.

Imatinib treatment led to significant improvements across multiple secondary endpoints including PVR (highlighted), an endpoint frequently

used in Phase 2 dose-finding trials (Patients included in analyses of hemodynamic parameters include those who completed the study

plus those who discontinued early but had a right heart catheterization performed at discontinuation.)

Extension Study

who completed the 24 week trial were eligible to be enrolled in an open label long-term extension study.

The improvements in 6MWD achieved

at 24 weeks were sustained during this extension and the mean difference in 6MWD compared to baseline improved up to 144 weeks in patients

that were able to tolerate the treatment.

Although these results were very encouraging, data from the extension trial also highlighted

the major limitation in using oral imatinib to treat PAH, which was drug tolerability.

Of the 103 patients originally randomized to the

imatinib arm of the core trial, only 21 remained on therapy after 180 weeks of dosing.

The patients who were able to tolerate the drug

long term showed a durable continued improvement in 6MWD.

and Tolerability

relatively poor tolerability of oral imatinib poses challenges for the potential use in PAH patients.

The AEs observed in the IMPRES

trial were consistent with the AE profile observed in cancer trials, with the exception of subdural hematoma, and led to a significant

number of discontinuations, which limited oral imatinib’s potential as a therapy for PAH.

Specifically, 44% of patients treated

with oral imatinib in the IMPRES trial experienced fluid retention, which is of particular concern in PAH patients who suffer from

heart failure.

The figure below lists the AEs reported in the 24-week Phase 3 IMPRES trial of oral imatinib in PAH patients on two

or more standard-of-care therapies.

An echocardiography sub-study of 74 IMPRES patients showed that patients randomized to oral imatinib showed significant improvements in certain measures of right ventricle function after 24 weeks compared with placebo.

Significant and consistent changes across hemodynamic and echo measures suggest a benefit of imatinib for the treatment of PAH with the potential to result in long-term improvements in pulmonary and cardiac function.

Imatinib treatment led to significant improvements across multiple secondary endpoints including PVR (highlighted), an endpoint frequently used in Phase 2 dose-finding trials (Patients included in analyses of hemodynamic parameters include those who completed the study plus those who discontinued early but had a right heart catheterization performed at discontinuation.)

Long-Term Extension Study

Patients who completed the 24 week trial were eligible to be enrolled in an open label long-term extension study.

The improvements in 6MWD achieved at 24 weeks were sustained during this extension and the mean difference in 6MWD compared to baseline improved up to 144 weeks in patients that were able to tolerate the treatment.

Although these results were very encouraging, data from the extension trial also highlighted the major limitation in using oral imatinib to treat PAH, which was drug tolerability.

Of the 103 patients originally randomized to the imatinib arm of the core trial, only 21 remained on therapy after 180 weeks of dosing.

The patients who were able to tolerate the drug long term showed a durable continued improvement in 6MWD.

Safety and Tolerability

The relatively poor tolerability of oral imatinib poses challenges for the potential use in PAH patients.

The AEs observed in the IMPRES trial were consistent with the AE profile observed in cancer trials, with the exception of subdural hematoma, and led to a significant number of discontinuations, which limited oral imatinib’s potential as a therapy for PAH.

Specifically, 44% of patients treated with oral imatinib in the IMPRES trial experienced fluid retention, which is of

particular concern in PAH patients who suffer from heart failure.

The figure below lists the AEs reported in the 24-week Phase 3 IMPRES trial of oral imatinib in PAH patients on two or more standard-of-care therapies.

Adverse events reported in >10% of the Imatinib group in the 24-week IMPRES trial, not including the trial extension

the IMPRES trial, there were 45 serious adverse events reported in imatinib treated patients, including some that were of particular

concern for PAH patients, who already have compromised cardiac function.

In the IMPRES trial, there were 45 serious adverse events reported in imatinib treated patients, including some that were of particular concern for PAH patients, who already have compromised cardiac function.

These included worsening of PAH;

dyspnea, or shortness

dyspnea, or shortness of breath;

peripheral edema;

and presyncope, or lightheadedness.

Of note, subdural hematoma occurred in eight patients (two in the core

study (1.9%), six in the trial extension (4.2%)) receiving imatinib and anticoagulation.

Of note, subdural

hematoma occurred in eight patients (two in the core study (1.9%), six in the trial extension (4.2%)) receiving imatinib and anticoagulation.

Serious adverse events reported in the IMPRES 24-week trial publication, not including the trial extension

enrolled in the IMPRES trial that were not able to tolerate 400 mg/day of imatinib did not see a significant improvement in 6MWD after

As shown in the figure below, those patients who were not dosed with 400 mg/day for more than half of the time did not achieve

the improvements in 6MWD that were significantly distinguished from those achieved by placebo treated patients.

These results suggest

that addressing the adverse events and tolerability of imatinib in PAH patients cannot be achieved by lowering the oral dose without

sacrificing this improvement.

Patients enrolled in the IMPRES trial that were not able to tolerate 400 mg/day of imatinib did not see a significant improvement in 6MWD after 24 weeks.

As shown in the figure below, those patients who were not dosed with 400 mg/day for more than half of the time did not achieve the improvements in 6MWD that were significantly distinguished from those achieved by placebo treated patients.

These results suggest that addressing the adverse events and tolerability of imatinib in PAH patients cannot be achieved by lowering the oral dose without sacrificing this improvement.

Further development of oral imatinib for the treatment of PAH was discontinued by Novartis.

Patients who were dosed with 400 mg/day for less than half of the duration of the trial did not achieve a significant improvement

an inhaled formulation of imatinib

is designed to deliver imatinib directly to the lungs to maximize the amount of drug in the targeted tissues while minimizing systemic

We believe that delivering imatinib in this way may maintain imatinib’s potential therapeutic benefits while improving

the tolerability of treatment.

The oral version of imatinib, marketed as Gleevec, is delivered as tablets containing imatinib mesylate

which is a salt of imatinib.

Imatinib mesylate is not readily amenable to being used in an inhaled formulation because it absorbs water

from the atmosphere if not stored in a rigorously controlled environment.

Moisture uptake would lead to potential stability concerns

and a high likelihood of poor delivery performance when inhaled from any dry powder inhaler device.

We also believe mesylate salt would

be a poor choice for an inhaled PAH therapy for additional reasons:

Patients who were dosed with 400 mg/day for less than half of the duration of the trial did not achieve a significant improvement in 6MWD

AV-101, an inhaled formulation of imatinib

AV-101 is designed to deliver imatinib directly to the lungs to maximize the amount of drug in the targeted tissues while minimizing systemic exposure.

We believe that delivering imatinib in this way may maintain imatinib’s potential therapeutic benefits while improving the tolerability of treatment.

The oral version of imatinib, marketed as Gleevec, is delivered as tablets containing imatinib mesylate which is a salt of imatinib.

Imatinib mesylate is not readily amenable to being used in an inhaled formulation because it absorbs water from the atmosphere if not stored in a rigorously controlled environment.

Moisture uptake would lead to potential stability concerns and a high likelihood of poor delivery performance when inhaled from any dry powder inhaler device.

We also believe mesylate salt would be a poor choice for an inhaled PAH therapy for additional reasons:

(i) the mesylate group introduces a genotoxic risk;

(ii) it increases

the formulation risk due to the existence of multiple crystal forms;

and (iii) delivery using the mesylate salt has the potential to

release the acidic mesylate upon deposition on the lung surface which could lead to transient irritation and increase the propensity

We therefore explored other salt and polymorphs of imatinib to identify a more suitable formulation for an inhaled therapy

without altering the active molecule.

We discovered a form that exhibited what we believe to be almost ideal physical chemical properties

for development as a dry powder for inhalation using capsules in a simple dry powder inhaler, or DPI.

also believe that dry powder inhalation is the most convenient mode of delivery to the lungs for patients.

The prospective advantages

of dry powder inhalation include that such formulations (i) can be delivered via a convenient, portable and easy-to-use delivery system;

(ii) it increases the formulation risk due to the existence of multiple crystal forms;

and (iii) delivery using the mesylate salt has the potential to release the acidic mesylate upon deposition on the lung surface which could lead to transient irritation and increase the propensity for cough.

We therefore explored other salt and polymorphs of imatinib to identify a more suitable formulation for an inhaled therapy without altering the active molecule.

We discovered a form that exhibited what we believe to be almost ideal physical chemical properties for development as a dry powder for inhalation using capsules in a simple dry powder inhaler, or DPI.

We also believe that dry powder inhalation is the most convenient mode of delivery to the lungs for patients.

The prospective advantages of dry powder inhalation include that such formulations (i) can be delivered via a convenient, portable and easy-to-use delivery system;

(ii) avoid the cords or batteries or bulky equipment that may be needed with nebulizers;

(iii) carry less risk of microbial contamination

due to the low moisture content powder;

(iv) have better anticipated shelf stability of the drug product compared to a solution dosage

and (v) can potentially improve lung retention of the powder imatinib compared to an aqueous nebulizer formulation, which may result

in reduced dose, dose frequency and peak exposure in the circulation.

have completed a placebo-controlled, randomized, double-blinded, single ascending dose and multiple ascending dose Phase 1 trial of AV-101

in 82 healthy volunteers.

(iii) carry less risk of microbial contamination due to the low moisture content powder;

(iv) have better anticipated shelf stability of the drug product compared to a solution dosage form;

and (v) can potentially improve lung retention of the powder imatinib compared to an aqueous nebulizer formulation, which may result in reduced dose, dose frequency and peak exposure in the circulation.

AV-101 Phase 1 Clinical Trial

We have completed a placebo-controlled, randomized, double-blinded, single ascending dose and multiple ascending dose Phase 1 clinical trial of AV-101 in 82 healthy adult volunteers.

Doses tested in the single ascending dose, or SAD, portion ranged from 1 to 90 mg of AV-101.

A 400 mg dose

of oral imatinib was included as a comparator.

The multiple ascending dose, or MAD, portion tested 10 mg, 30 mg and 90 mg BID for seven

The purpose of the trial was to establish safety and tolerability of AV-101 and to demonstrate that systemic levels of AV-101 were

lower than oral imatinib.

doses resulted in lower systemic plasma levels of imatinib compared to those observed following a single 400 mg oral dose.

In the figure

below, the blue dashed line shows simulated steady state levels of oral imatinib in the blood extrapolated from the 400 mg cohort in

the SAD potion of our Phase 1 trial.

A 400 mg dose of oral imatinib was included as a comparator.

The multiple ascending dose, or MAD, portion tested 10 mg, 30 mg and 90 mg BID ( bis in die ;

or twice a day) for seven days.

The purpose of the trial was to establish safety and tolerability of AV-101 and to demonstrate that systemic levels of AV-101 were lower than oral imatinib.

All doses resulted in lower systemic plasma levels of imatinib compared to those observed following a single 400 mg oral dose.

In the figure below, the blue dashed line shows simulated steady state levels of oral imatinib in the blood extrapolated from the 400 mg cohort in the SAD potion of our Phase 1 clinical trial.

These levels are consistent with multiple publications on oral imatinib pharmacokinetics.

lines show the blood concentrations following the final dose of AV-101 in the MAD portion of our Phase 1 trial, on day 7, when steady

state concentrations had been achieved.

The dotted part of the 90 mg dose shows a simulated representation of an additional dose twelve

hours later to illustrate steady state BID dosing.

The other lines show the blood concentrations following the final dose of AV-101 in the MAD portion of our Phase 1 clinical trial, on day 7, when steady state concentrations had been achieved.

The dotted part of the 90 mg dose shows a simulated representation of an additional dose twelve hours later to illustrate steady state BID dosing.

Phase 1 systemic exposure of AV-101 vs 400 mg oral imatinib.

also predicted lung exposures using a physiologically based pharmacokinetic, or PBPK, model built from a published method to extrapolate

lung exposures from blood levels, which was informed by our Phase 1 plasma data.

Although there is inherent uncertainty associated with

all models that extrapolate data, we expect the exposures of imatinib obtained in the lungs at the dose range we intend to use in the

Phase 2b portion of our Phase 2b/Phase 3 trial of 10 mg, 35 mg and 70 mg, all BID, to overlap or surpass lung levels predicted from 400

mg oral imatinib.

The dashed blue line in Figure 11 shows lung exposures extrapolated from published steady state PK data and informed

by our Phase 1 plasma data for oral imatinib at 400 mg.

The solid lines show extrapolated lung levels of AV-101 doses using our PBPK

We also predicted lung exposures using a physiologically based pharmacokinetic, or PBPK, model built from a published method to extrapolate lung exposures from blood levels, which was informed by our Phase 1 plasma data.

Although there is inherent uncertainty associated with all models that extrapolate data, we expect the exposures of imatinib obtained in the lungs at the dose range we intend to use in the Phase 2b portion of our Phase 2b/Phase 3 trial of 35 mg and 70 mg, all BID, to overlap or surpass lung levels predicted from 400 mg oral imatinib.

The dashed blue line in Figure 11 shows lung

exposures extrapolated from published steady state PK data and informed by our Phase 1 plasma data for oral imatinib at 400 mg.

The solid lines show extrapolated lung levels of AV-101 doses using our PBPK model.

Predicted Phase 2b lung exposures from dosing of 10, 35 and 70 mg AV-101.

We expect the lung exposures of imatinib delivered by AV-101

in the dose range to overlap or surpass the predicted lung exposures from 400 mg oral imatinib

and Tolerability in Phase 1 trial

were no serious adverse events reported in our Phase 1 trial.

There were no changes in vital signs including pulmonary function testing

and oxygen saturations.

Of the less severe adverse events, there was one discontinuation at the highest dose due to vomiting and the

most frequent adverse event was a cough that was reported in 55% of volunteers at the highest 90 mg dose.

This cough was transient, predominantly

mild in nature, resolved on its own within 30 minutes and did not lead to any discontinuations.

We believe that the cough may be a function

of the total amount of powder delivered in the high Phase 1 dose.

The intended dosing for the Phase 2b/Phase 3 trial will use less than

40% of the amount of powder that was inhaled at the highest Phase 1 dose.

The figure below shows the adverse events reported in our Phase

1 MAD trial of AV-101 in healthy volunteers.

We expect the lung exposures of imatinib delivered by AV-101 in the dose range to overlap or surpass the predicted lung exposures from 400 mg oral imatinib

Safety and Tolerability in Phase 1 Clinical Trial

There were no serious adverse events reported in our Phase 1 clinical trial.

Adverse events reported in the Phase 1 clinical trial were classified as mild or moderate.

There were no changes in vital signs including pulmonary function testing and oxygen saturations.

Of the less severe adverse events, there was one discontinuation at the highest dose due to vomiting and the most frequent adverse event was a cough that was reported in 55% of volunteers at the highest 90 mg dose.

This cough was transient, predominantly mild in nature, resolved on its own within 30 minutes and did not lead to any discontinuations.

We believe that the cough may be a function of the total amount of powder delivered in the high Phase 1 dose.

The intended dosing for the Phase 2b/Phase 3 trial will use less than 40% of the amount of powder that was inhaled

at the highest Phase 1 dose.

The figure below shows the adverse events reported in our Phase 1 MAD trial of AV-101 in healthy volunteers.

Adverse events reported in the Phase 1 MAD trial of AV-101 in healthy volunteers

submitted to the FDA summaries of the safety and tolerability findings from our Phase 1 trial along with the systemic plasma levels for

the participants from the trial.

We submitted to the FDA summaries of the safety and tolerability findings from our Phase 1 clinical trial along with the systemic plasma levels for the participants from the trial.

We also submitted information on our drug substance and drug product.

At our April 2021 meeting, we

reached alignment with the FDA that our Phase 2b/Phase 3 trial design was acceptable and could, if successful with strong results, support

a NDA submission using the change in 6MWD compared to placebo over 24 weeks as the primary endpoint in the Phase 3 portion of our trial.

Phase 2b/Phase 3 IMPAHCT:

At our April 2021 meeting, we reached alignment with the FDA that our Phase 2b/Phase 3 trial design was acceptable and could, if successful with strong results, support a NDA submission using the change in 6MWD compared to placebo over 24 weeks as the primary endpoint in the Phase 3 portion of our trial.

AV-101 Phase 2b/Phase 3 IMPAHCT:

Inhaled iMatinib Pulmonary Arterial Hypertension Clinical Trial

December 2021, we announced the initiation of IMPAHCT, our global, Phase 2b/Phase 3 trial in Functional Class II through Class IV PAH

patients with inadequate disease control on at least two approved PAH therapies.

This clinical trial will establish the target dose in

the Phase 2b portion then continue into a Phase 3 efficacy trial using the selected dose.

The Phase 2b portion of this double-blind,

placebo-controlled randomized trial is designed to assess safety and tolerability using change in PVR, an objective measure of the effect

of AV-101 on hemodynamic function in PAH patients, as the primary endpoint to inform the selection of the appropriate dose for the Phase

3 portion of the trial.

Change in 6MWD compared to placebo will be a secondary endpoint, and all efficacy endpoints will be measured

following 24 weeks of treatment.

The Phase 3 portion of the trial will use the change in 6MWD compared to placebo at 24 weeks as the

primary endpoint.

Secondary endpoints in the Phase 2b/Phase 3 trial will include N-terminal pro B-type natriuretic peptide, or NT-proBNP,

a biomarker associated with heart failure;

In December 2021, we announced the initiation of IMPAHCT, our global Phase 2b/Phase 3 trial in adults with Functional Class II through Class IV PAH with inadequate disease control on at least two approved PAH therapies.

This clinical trial, currently enrolling patients in the Phase 2b portion, will establish the target dose in the Phase 2b portion then continue into a Phase 3 efficacy trial using the selected dose.

The Phase 2b portion of this double-blind, placebo-controlled randomized trial is designed to assess safety and tolerability using change in PVR, an objective measure of the effect of AV-101 on hemodynamic function in PAH patients, as the primary endpoint to inform the selection of the appropriate dose for the Phase 3 portion of the trial.

Change in 6MWD compared to placebo will be a secondary endpoint, and all efficacy endpoints will be measured following 24 weeks of treatment.

The Phase 3 portion of the trial will use the change in 6MWD compared to placebo at 24 weeks as the primary endpoint.

Secondary endpoints in the Phase 2b/Phase 3 trial will include N-terminal pro B-type natriuretic peptide, or NT-proBNP, a biomarker associated with heart failure;

hemodynamic parameters;

4 unchanged sentences

and quality of life measures.

All patients completing the Phase 2b or Phase 3 portions will be invited to enter

a long-term extension trial of AV-101.

2b/Phase 3 Enrollment and Timing

Phase 2b/Phase 3 trial will be a single continuous trial made up of three periods.

We are currently in Period 1, which is the Phase 2b enrollment portion of the trial.

Approximately 200

patients will be enrolled across four treatment arms, which include three dose groups of AV-101 and one placebo group.

The primary endpoint

is the change in PVR compared to placebo at 24 weeks.

Data from the Phase 2b portion will inform the selection of an optimal dose of

AV-101 for Phase 3.

We anticipate that topline Phase 2b data will be available in the middle of 2023.

Period 2 begins as soon as enrollment completes in the Phase 2b portion of the trial.

This second period

signifies the start of enrollment in the Phase 3 portion of the trial.

We expect to complete enrollment of the Phase 2b portion of the

trial by the end of 2022 and commence enrollment of the Phase 3 portion thereafter.

Period 3 begins once the optimal dose is selected and will then only enroll across two treatment arms,

the optimal dose of AV-101 and the placebo arm.

Once the final patient enrolled has completed 24 weeks on study, the Phase 3 portion

of the trial is complete.

Design of the Phase 2b/Phase 3 trial of AV-101 in PAH patients

the results of the Phase 3 portion of this trial show a statistically significant and potentially clinically meaningful benefit in 6MWD,

we plan to submit a NDA, with the FDA for AV-101 for the treatment of PAH.

of the Potential of Antiproliferative Medicines as a Novel Class of PAH Therapeutics

no approved PAH therapy directly addresses the underlying cell proliferation that leads to increased pulmonary arterial pressure, the

concept behind targeting cell proliferation to treat PAH is not new.

The most advanced antiproliferative compound in the clinic is sotatercept,

a molecule that blocks signaling of members of the TGF-beta family of growth factors.

Results from a Phase 2 clinical trial in PAH showed

that sotatercept led to a reduction in PVR, providing further support for the therapeutic potential of antiproliferative product candidates

We are encouraged by these results as they provide independent confirmation of the importance of antiproliferative products as

a potentially broad class of PAH therapeutics to complement vasodilators.

Similar to the vasodilator field, we believe that PAH patients

may benefit from treatment with multiple antiproliferative therapies directed against different targets.

Manufacturing

use third-party contract manufacturers for the production of AV-101.

Our active pharmaceutical ingredient, or API, can be purchased from

multiple contract manufacturers in compliance with the FDA’s current Good Manufacturing Practice, or current GMP, regulations and

European Pharmacopoeia, or EP, standards.

The final step in the manufacture of API is completed at one of two contract manufacturing

organizations that comply with the FDA’s current GMP regulations.

AV-101 finished product is processed for aerosol use and filled

into capsules by our contract fill/finish provider in the United States, which is required to comply with current GMP regulations.

AV-101 is a drug-device combination product, we have contracted with a third-party to manufacture the single-dose inhaler device that

we use for delivering inhaled AV-101 to patients in our Phase 2b/Phase 3 clinical trial.

and stability testing to date show stability

of at least 18 months for one batch of API under conditions at a temperature of 25° Celsius and 60% relative humidity and 12 months

for our bulk processed powder.

We expect that stability testing for our bulk API and drug product to reach at least 24 months by the

time we see topline data from our Phase 2b/Phase 3 clinical trial.

our April 2021 meeting, the FDA confirmed that our API, finished product, and single-dose inhaler producers are acceptable for use in

a Phase 2b/Phase 3 clinical trial.

We have completed the manufacture of the initial clinical supply and have the finished product, device

and ancillary supplies positioned at our global distribution partner and drug supply has been delivered to the active clinical sites.

anticipation of a potential NDA filing, we plan to manufacture a minimum of three batches of API, finished product, and single-dose inhaler

devices for registration purposes and to test these batches for stability with a goal of establishing a commercial shelf life of at least

two years for finished product and bulk API.

and Marketing

commercialization strategy is to develop AV-101 into a leading therapy worldwide for the treatment of PAH.

Chief Executive Officer and Senior Vice President, Commercial have significant commercial experience, but beyond that we have not yet

established a sales and marketing organization.

We intend to recruit our own specialty sales force in the United States focused on promoting

All patients completing the Phase 2b or Phase 3 portions will be invited to enter a long-term extension trial of AV-101.

Phase 2b/Phase 3 Enrollment and Timing

The Phase 2b/Phase 3 trial employs an operationally seamless, adaptive design consisting of three parts.

● We are currently in Part 1, which is the Phase 2b enrollment portion of the trial.

Approximately 200 patients will be enrolled across four treatment arms, which include three dose groups of AV-101 and one placebo group.

The primary endpoint is the change in PVR compared to placebo at 24 weeks.

Data from the Phase 2b portion will inform the selection of an optimal dose of AV-101 for Phase 3.

We anticipate that topline Phase 2b data will be available in fourth quarter of 2023 or the first quarter of 2024.

● Part 2 begins as soon as enrollment completes in the Phase 2b portion of the trial.

This second part signifies the start of enrollment in the Phase 3 portion of the trial.

We expect to complete enrollment of the Phase 2b portion of the trial in the middle of 2023 and commence enrollment of the Phase 3 portion thereafter.

● Part 3 begins once the optimal dose is selected and will then only enroll across two treatment arms, the optimal dose of AV-101 and the placebo arm.

Once the final patient enrolled has completed 24 weeks on study, the Phase 3 portion of the trial is complete.

Design of the Phase 2b/Phase 3 trial of AV-101 in adults with PAH

If the results of the Phase 3 portion of this trial show a statistically significant and potentially clinically meaningful benefit in 6MWD, we plan to submit a NDA, with the FDA for AV-101 for the treatment of PAH.

Confirmation of the Potential of Antiproliferative Medicines as a Novel Class of PAH Therapeutics

Although no approved PAH therapy directly addresses the underlying cell proliferation that leads to increased pulmonary arterial pressure, the concept behind targeting cell proliferation to treat PAH is not new.

The most advanced investigational antiproliferative compound in the clinic is sotatercept, a molecule that blocks signaling of members of the TGF-beta family of growth factors.

Results from a Phase 3 clinical trial in PAH showed that sotatercept led to a statistically significant improvement in 6MWD with a safety profile reported to be generally consistent with what was observed with sotatercept in the previous Phase 2 study, providing further support for the therapeutic potential of antiproliferative product candidates in PAH.

We are encouraged by these results as they provide independent confirmation of the importance of antiproliferative products as a potentially broad class of PAH therapeutics to complement vasodilators.

Similar to the vasodilator field, we believe that PAH patients may benefit from treatment with multiple antiproliferative therapies directed against different targets.

Manufacturing and Supply

We use third-party contract manufacturers for the production of AV-101.

Our active pharmaceutical ingredient, or API, can be purchased from multiple contract manufacturers in compliance with the FDA’s current Good Manufacturing Practice, or current GMP, regulations and European Pharmacopoeia, or EP, standards.

The final step in the manufacture of API is completed at one of two contract manufacturing organizations that comply with the FDA’s current GMP regulations.

AV-101 finished product is processed for aerosol use and filled into capsules by our contract fill/finish provider in the United States, which is required to comply with current GMP regulations.

As AV-101 is a drug-device combination product, we have contracted with a third-party to manufacture the single-dose inhaler device that we use for delivering inhaled AV-101 to patients in our Phase 2b/Phase 3 clinical trial.

Release and stability testing to date supports stability of at least 36 months for API under ambient conditions and supports stability of at least 30 months for drug product also under ambient conditions.

At our April 2021 meeting, the FDA confirmed that our API, finished product, and single-dose inhaler producers are acceptable for use in a Phase 2b/Phase 3 clinical trial.

We have completed the manufacture of the initial clinical supply and have the finished product, device and ancillary supplies positioned at our global distribution partner and drug supply has been delivered to the active clinical sites.

In anticipation of a potential NDA filing, we plan to manufacture a minimum of three batches of API, finished product, and single-dose inhaler devices for registration purposes and to test these batches for stability with a goal of establishing a commercial shelf life of at least two years for finished product and bulk API.

Sales and Marketing

Our commercialization strategy is to develop AV-101 into a leading therapy worldwide for the treatment of PAH.

Our Chief Executive Officer and Chief Commercial Officer have significant commercial experience, but beyond that we have not yet established a sales and marketing organization.

We intend to recruit our own specialty sales force in the United States focused on promoting AV-101.

We plan to target our marketing and sales efforts to pulmonologists and cardiologists who specialize in treating PAH.

a specialty sales force of approximately 75-100 representatives, supported by reimbursement specialists and a medical affairs team, will

enable us to call on the pulmonologists and cardiologists who specialize in treating PAH.

believe that the market for AV-101 in the five largest countries in the European Union represents the bulk of the potential European

market and that China and Japan represent the bulk of the potential Asian market.

We plan to enter one or multiple collaborations to

commercialize AV-101 in Europe and Asia.

believe AV-101 will receive coverage and reimbursement by public and commercial payors, but we cannot guarantee this will happen.

more information regarding these risks, please see “Risk Factors—Risks Related to Commercialization—The successful

commercialization of AV-101 will depend in part on the extent to which governmental authorities, private health insurers, and other third-party

payors provide coverage and adequate reimbursement levels.

Failure to obtain or maintain coverage and adequate reimbursement for AV-101,

if approved, could limit our ability to market our product and decrease our ability to generate revenue.”

commercial success depends in part on our ability to obtain and maintain proprietary protection for our products, novel discoveries,

drug development technologies and know-how;

We believe a specialty sales force of approximately 75-100 representatives, supported by reimbursement specialists and a medical affairs team, will enable us to call on the pulmonologists and cardiologists who specialize in treating PAH.

We believe that the market for AV-101 in the five largest countries in the European Union represents the bulk of the potential European market and that China and Japan represent the bulk of the potential Asian market.

We plan to enter one or multiple collaborations to commercialize AV-101 in Europe and Asia.

We believe AV-101 will receive coverage and reimbursement by public and commercial payors, but we cannot guarantee this will happen.

For more information regarding these risks, please see “Risk Factors—Risks Related to Commercialization—The successful commercialization of AV-101 will depend in part on the extent to which governmental authorities, private health insurers, and other third-party payors provide coverage and adequate reimbursement levels.

Failure to obtain or maintain coverage and adequate reimbursement for AV-101, if approved, could limit our ability to market our product and decrease our ability to generate revenue.”

Intellectual Property

Our commercial success depends in part on our ability to obtain and maintain proprietary protection for our products, novel discoveries, drug development technologies and know-how;

to operate without infringing on or otherwise violating the proprietary rights of others;

and to prevent others from infringing or otherwise violating our proprietary rights.

Our policy is to seek to protect our proprietary

position by, among other methods, filing or in-licensing U.S.

and foreign patents and patent applications related to our products and

other proprietary technology, inventions and improvements that are important to the development and implementation of our business.

also rely on trademarks, trade secrets, know-how, continuing technological innovation and potential in-licensing opportunities to develop

and maintain our proprietary position.

intellectual property portfolio includes an issued patent in the United States, pending patent applications in the United States,

under the Patent Cooperation Treaty (PCT international applications), and in commercially relevant foreign jurisdictions for our products.

The PCT international applications preserve all of our rights to file patent applications in commercially relevant foreign jurisdictions

for our products.

As of March 28, 2022, we own one U.S.

patent, eight U.S.

patent applications (of which one application has received

a notice of allowance), two pending PCT international applications, and twenty foreign patent applications.

portfolio is expected to expire between May 14, 2040 and February 15, 2042, excluding any extension of patent term that may be available

and assuming that the filed patent applications will issue as patents.

Our foreign patent portfolio is expected to expire between May

14, 2040 and February 15, 2042, excluding any extension of patent terms that may be available and assuming that filed applications will

issue as patents and that the foreign patent terms are calculated similarly to the calculation of U.S.

patent terms for the corresponding

Our policy is to seek to protect our proprietary position by, among other methods, filing or in-licensing U.S.

and foreign patents and patent applications related to our products and other proprietary technology, inventions and improvements that are important to the development and implementation of our business.

We also rely on trademarks, trade secrets, know-how,

continuing technological innovation and potential in-licensing opportunities to develop and maintain our proprietary position.

Our intellectual property portfolio includes issued patents in the United States, pending patent applications in the United States, under the Patent Cooperation Treaty (PCT international applications), and in commercially relevant foreign jurisdictions for our products.

The PCT international applications preserve all of our rights to file patent applications in commercially relevant foreign jurisdictions for our products.

As of March 27, 2023, we own four U.S.

patents, eight U.S.

patent applications, three pending PCT international applications, and twenty foreign patent applications.

patent portfolio is expected to expire between May 14, 2040 and February 15, 2042, excluding any extension of patent term that may be available and assuming that the filed patent applications will issue as patents.

Our foreign patent portfolio is expected to expire between May 14, 2040 and February 15, 2042, excluding any extension of patent terms that may be available and assuming that filed applications will issue as patents and that the foreign patent terms are calculated similarly to the calculation of U.S.

patent terms for the corresponding U.S.

portion of the patent portfolio.

Our patent portfolio is summarized in the following table.

APPLICATION/ PATENT NO.

RELATED PRODUCT

PROTECTION SOUGHT

PROJECTED EXPIRATION*

Composition of Matter;

PCT/US20/32872

International

Composition of Matter;

International PCT

Composition of Matter;

PCT/US20/32874

International

International PCT

Composition of Matter;

Combination Products;

Composition of Matter;

Combination Products;

1 unchanged sentence

Composition of Matter;

International

Application Number

Combination Products;

International PCT

Composition of Matter

PCT/US22/16422

Composition of Matter

International PCT

Composition of Matter;

202080051359.5

Composition of Matter;

10-2021-7041312

Composition of Matter;

Republic of Korea

MX/A/2021/104029

Composition of Matter;

BR1120210230149

Composition of Matter;

KW/P/2021/466

Composition of Matter;

OM/P/2021/00467

Composition of Matter;

QA/202111/000655

Composition of Matter;

P6002085/2021

PCT/US2021/060526

Combination Products;

International

Composition of Matter;

Projected patent expiration dates were calculated for pending U.S.

Nonprovisional Applications and Foreign Applications based on filing

These calculations do not take into account any terminal disclaimers or patent term adjustments that may occur during prosecution

or for pharmaceutical patents in Australia.

Provisional and International PCT filings will not issue as patents and therefore do

not have a projected expiration date.

European filings will issue only in validated European countries and the projected expiration date

will apply to those individual country patents.

intellectual property estate strategy is designed to provide multiple layers of protection, including:

(1) proprietary patent rights

with claims directed to our drug product;

Nonprovisional Applications and Foreign Applications based on filing date.

These calculations do not take into account any terminal disclaimers or patent term adjustments that may occur during prosecution or for pharmaceutical patents in Australia.

Provisional and International PCT filings will not issue as patents and therefore do not have a projected expiration date.

European filings will issue only in validated European countries and the projected expiration date will apply to those individual country patents.

Our intellectual property estate strategy is designed to provide multiple layers of protection, including:

(1) proprietary patent rights with claims directed to our drug product;

(2) proprietary patent rights covering methods of treatment using our drug product;

proprietary patent rights covering innovative manufacturing processes.

we seek broad coverage under our pending patent applications, there is always a risk that a modification of the product or manufacturing

process may allow a competitor to avoid infringement claims.

In addition, patents, if granted, expire, and we cannot provide any assurance

that any patents will be issued from our pending or any future applications or that any issued patents will adequately protect our products.

have conducted freedom to operate, or FTO, analyses of the current patent landscape with respect to our lead product candidates.

so, we have strived to ensure our ability to operate freely within the complex patent landscape of inhalable kinase inhibitors and the

use of such products in the field of PAH.

are also working to develop new formulations of our drug products and new uses for such products, for which we intend to seek patent

protection on our own to expand the layers of protection provided by our intellectual property estate.

Protection and Terms

patents extend for varying periods depending on the date of filing of the patent application or the date of patent issuance and the legal

term of patents in the countries in which they are obtained.

Generally, patents issued from regularly filed applications in the United

States are granted a term of 20 years from the earliest effective filing date.

In addition, in certain instances, a patent term can be

adjusted to recapture a portion of the United States Patent and Trademark Office, or the USPTO, delay in issuing the patent, and extended

to recapture a portion of the patent term effectively lost as a result of the FDA regulatory review period of the drug covered by the

However, as to the FDA component, the restoration period cannot be longer than five years, the total patent term including the

restoration period must not exceed 14 years following FDA approval of the drug, and the extension may only apply to one patent that covers

the approved drug (and to only those patent claims covering the approved drug, a method for using it, or a method for manufacturing it).

and (3) proprietary patent rights covering innovative manufacturing processes.

While we seek broad coverage under our pending patent applications, there is always a risk that a modification of the product or manufacturing process may allow a competitor to avoid infringement claims.

In addition, patents, if granted, expire, and we cannot provide any assurance that any patents will be issued from our pending or any future applications or that any issued patents will adequately protect our products.

We have conducted freedom to operate, or FTO, analyses of the current patent landscape with respect to our lead product candidates.

In doing so, we have strived to ensure our ability to operate freely within the complex patent landscape of inhalable kinase inhibitors and the use of such products in the field of PAH.

We are also working to develop new formulations of our drug products and new uses for such products, for which we intend to seek patent protection on our own to expand the layers of protection provided by our intellectual property estate.

Patent Protection and Terms

Individual patents extend for varying periods depending on the date of filing of the patent application or the date of patent issuance and the legal term of patents in the countries in which they are obtained.

Generally, patents issued from regularly filed applications in the United States are granted a term of 20 years from the earliest effective filing date.

In addition, in certain instances, a patent term can be adjusted to recapture a portion of the United States Patent and Trademark Office, or the USPTO, delay in issuing the patent, and extended to recapture a portion of the patent term effectively lost as a result of the FDA regulatory review period of the drug covered by the patent.

However, as to the FDA component, the restoration period cannot be longer than five years, the total patent term including the restoration period must not exceed 14 years following FDA approval of the drug, and the extension may only apply to one patent that covers the approved drug (and to only those patent claims covering the approved drug, a method for using it, or a method for manufacturing it).

There can be no assurance that any such patent term adjustment or extension will be obtained.

The duration of foreign patents varies

in accordance with provisions of applicable local law, but typically is also 20 years from the earliest effective filing date.

the actual protection afforded by a patent varies on a product-by-product basis, from country to country, and depends upon many factors,

including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal

remedies in a particular country and the validity and enforceability of the patent.

the patent positions of biotechnology and pharmaceutical products and processes like those we intend to develop and commercialize are

generally uncertain and involve complex legal and factual questions.

No consistent policy regarding the breadth of claims allowed in

such patents has emerged to date in the United States.

The duration of foreign patents varies in accordance with provisions of applicable local law, but typically is also 20 years from the earliest effective filing date.

However, the actual protection afforded by a patent varies on a product-by-product basis, from country to country, and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent.

Furthermore, the patent positions of biotechnology and pharmaceutical products and processes like those we intend to develop and commercialize are generally uncertain and involve complex legal and factual questions.

No consistent policy regarding the breadth of claims allowed in such patents has emerged to date in the United States.

The patent situation outside the United States is even more uncertain.

in either the patent laws or in interpretations of patent laws in the United States and other countries can diminish our ability to protect

our inventions and enforce our intellectual property rights, can make it easier to challenge the validity, enforceability or scope of

any patents that may issue, and, more generally, could affect the value of our intellectual property.

Accordingly, we cannot predict

the breadth of claims that may be allowed or enforced in our patents or in third-party patents.

Patent Filings

Changes in either the patent laws or in interpretations of patent laws in

the United States and other countries can diminish our ability to protect our inventions and enforce our intellectual property rights, can make it easier to challenge the validity, enforceability or scope of any patents that may issue, and, more generally, could affect the value of our intellectual property.

Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents.

Third-Party Patent Filings

Numerous U.S.

and foreign issued patents and patent applications owned by third parties exist in the fields in which we are developing products.

In addition, because patent applications can take many years to issue, there may be applications unknown to us, which may later result

in issued patents that our products or proprietary technologies may infringe.

Moreover, we may be aware of patent applications, but incorrectly

predict the likelihood of those applications issuing with claims of relevance to us.

law, a person may be able to patent a discovery of a new way to use a previously known compound, even if such compound itself is

patented, provided the newly discovered use is novel and non-obvious.

Such a method-of-use patent, however, if valid, only protects the

use of a claimed compound for the specified methods claimed in the patent.

This type of patent does not prevent persons from using the

compound for any previously known use of the compound.

Further, this type of patent does not prevent persons from making and marketing

the compound for an indication that is outside the scope of the patented method.

Secrets and Other Protections

addition to the protections afforded by patents and other regulatory protections, we may rely, in some circumstances, on trade secrets

to protect our technology.

Trade secrets may be useful to protect proprietary know-how that is not patentable or which we elect not to

In addition, because patent applications can take many years to issue, there may be applications unknown to us, which may later result in issued patents that our products or proprietary technologies may infringe.

Moreover, we may be aware of patent applications, but incorrectly predict the likelihood of those applications issuing with claims of relevance to us.

law, a person may be able to patent a discovery of a new way to use a previously known compound, even if such compound itself is patented, provided the newly discovered use is novel and non-obvious.

Such a method-of-use patent, however, if valid, only protects the use of a claimed compound for the specified methods claimed in the patent.

This type of patent does not prevent persons from using the compound for any previously known use of the compound.

Further, this type of patent does not prevent persons from making and marketing the compound for an indication that is outside the scope of the patented method.

Trade Secrets and Other Protections

In addition to the protections afforded by patents and other regulatory protections, we may rely, in some circumstances, on trade secrets to protect our technology.

Trade secrets may be useful to protect proprietary know-how that is not patentable or which we elect not to patent.

Trade secrets may also be useful for processes or improvements for which patents are difficult to enforce.

also protect our products and proprietary technology through confidentiality agreements with employees, consultants, advisors, contractors

and collaborators.

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 such 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

also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises

and physical and electronic security of our information technology systems.

of Third-Party Proprietary Rights

commercial success will depend in part on not infringing upon or otherwise violating the intellectual property and proprietary rights

of third parties.

If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license

from such third party to continue developing and marketing our products and technology.

However, we may not be able to obtain any required

license on commercially reasonable terms or at all.

Even if we were able to obtain a license, it could be non-exclusive, thereby giving

our competitors access to the same technologies licensed to us.

We could also be forced, including by court order, to cease commercializing

the infringing product or technology.

In addition, we could be found liable for monetary damages, including treble damages and attorneys’

fees, if we are found to have willfully infringed a patent.

A finding of infringement could prevent us from commercializing our products

or force us to cease some of our business operations.

For more information regarding these risks, please see “Risk Factors—Risks

Related to Our Intellectual Property.”

biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis

on proprietary products.

We face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical

and biotechnology companies, academic institutions and governmental agencies and public and private research institutions.

of our potential competitors have significantly greater financial resources and expertise in research and development, manufacturing,

preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do.

early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established

key competitive factors that will differentiate AV-101, if approved, are likely to be its efficacy, safety, convenience, price, and the

availability of reimbursement from commercial, government and other third-party payors.

intend to seek approval for AV-101 initially for the treatment of PAH in patients taking two or more approved PAH therapies.

that physicians have many treatment options for patients already taking two or more treatments for PAH, including prostanoids available

in oral form as Orenitram (United Therapeutics Corporation, or United Therapeutics) and Uptravi (Janssen Pharmaceuticals, Inc., or Janssen),

by inhalation as Tyvaso (United Therapeutics), Ventavis (Janssen), and by infusion as Remodulin (United Therapeutics), Flolan (GlaxoSmithKline

plc) and Veletri (Janssen).

We believe that AV-101, if approved, could be used prior to or in combination with prostanoids, and in combination

with existing front-line agents such as the oral PDE5 inhibitors, including Revatio (Pfizer) and Adcirca (United Therapeutics);

stimulator Adempas (Bayer AG);

We also protect our products and proprietary technology through confidentiality agreements with employees, consultants, advisors, contractors and collaborators.

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 such 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.

We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems.

Infringement of Third-Party Proprietary Rights

Our commercial success will depend in part on not infringing upon or otherwise violating the intellectual property and proprietary rights of third parties.

If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developing and marketing our products and technology.

However, we may not be able to obtain any required license on commercially reasonable terms or at all.

Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us.

We could also be forced, including by court order, to cease commercializing the infringing product or technology.

In addition, we could be found liable for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent.

A finding of infringement could prevent us from commercializing our products or force us to cease some of our business operations.

For more information regarding these risks, please see “Risk Factors—Risks Related to Our Intellectual Property.”

The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products.

We face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and governmental agencies and public and private research institutions.

Some of our potential competitors have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do.

Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

The key competitive factors that will differentiate AV-101, if approved, are likely to be its efficacy, safety, convenience, price, and the availability of reimbursement from commercial, government and other third-party payors.

We intend to seek approval for AV-101 initially for the treatment of PAH in patients taking two or more approved PAH therapies.

We recognize that physicians have many treatment options for patients already taking two or more treatments for PAH, including prostanoids available in oral form as Orenitram (United Therapeutics Corporation, or United Therapeutics) and Uptravi (Janssen Pharmaceuticals, Inc., or Janssen), by inhalation as Tyvaso and Tyvaso DPI (United Therapeutics), Ventavis (Janssen), and by infusion as Remodulin (United Therapeutics), Flolan (GlaxoSmithKline plc) and Veletri (Janssen).

We believe that AV-101, if approved, could be used prior to or in combination with prostanoids, and in combination with existing front-line agents such as the oral PDE5 inhibitors, including Revatio (Pfizer) and Adcirca (United Therapeutics);

the sGC stimulator Adempas (Bayer AG);

and oral ERAs, including Tracleer (Janssen), Letairis (Gilead) and Opsumit (Janssen).

PAH is also an active

indication for investigational drugs, and we may face competition in the future from sotatercept (Acceleron Pharma, Inc., a wholly-owned

subsidiary of Merck & Co., Inc.), seralutinib (Gossamer Bio, Inc.), and/or rodatristat (Altavant Sciences, Inc.).

To our knowledge,

Tenax Therapeutics, Inc.

PAH is also an active indication for investigational drugs, and we may face competition in the future from sotatercept (Acceleron Pharma, Inc., a wholly-owned subsidiary of Merck & Co., Inc.), seralutinib (Gossamer Bio, Inc.), and/or rodatristat (Enzyvant, Inc.).

To our knowledge, Tenax Therapeutics, Inc.

and Aerami Therapeutics, Inc.

are developing other formulations of imatinib for PAH, and both companies have

initiated Phase 1 clinical trials.

States—FDA Process

the United States, pharmaceutical products are subject to extensive regulation by the FDA.

The FDCA and other federal and state statutes

and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling,

promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products.

We, along with third-party contractors, will be required to navigate the various preclinical, clinical and commercial approval requirements

of the governing regulatory authorities of the countries in which we wish to conduct studies or seek approval of our product candidates.

Failure to comply with applicable United States requirements may subject a company to a variety of administrative or judicial sanctions,

such as FDA refusal to approve pending NDAs, withdrawal of an approval, warning or untitled letters, clinical holds, product recalls

or withdrawals from the market, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals

of government contracts, restitution, disgorgement of profits, civil penalties, and criminal prosecution.

approval is required before any new unapproved product or a product with certain changes to a previously approved product, including

a new use of a previously approved drug, can be marketed in the United States.

The steps required to be completed by the FDA before a

drug may be marketed in the United States generally includes the following:

of preclinical laboratory tests, animal studies, and formulation studies performed in accordance

with the FDA’s Good Laboratory Practice, or GLP, regulations;

to the FDA of an investigational new drug, or IND, application for human clinical testing,

which must become effective before human clinical trials may begin and must be updated annually

or when significant changes are made;

by an independent institutional review board, or IRB, or ethics committee at each clinical

site before the clinical trial is commenced;

● performance

of adequate and well-controlled human clinical trials in accordance with applicable IND regulations,

GCP, requirements and other clinical-trial related regulations to establish the safety and

efficacy of the proposed drug for each indication;

● preparation

and submission to the FDA of a new drug application, or NDA, after completion of all pivotal

clinical trials, which includes not only the results of the clinical trials, but also, detailed

information on the chemistry, manufacture and quality controls for the product candidate

and proposed labeling;

● satisfactory

completion of an FDA Advisory Committee review, if applicable;

determination by the FDA within 60 days of its receipt of an NDA to file the application

● satisfactory

completion of an FDA pre-approval inspection of the manufacturing facility or facilities

at which the proposed drug is produced to assess compliance with current GMP regulations

and of selected clinical trial sites to assess compliance with GCPs;

review and approval of the NDA to permit commercial marketing of the product for particular

indications for use in the United States.

of FDA pre-market approval requirements typically takes many years and the actual time required may vary substantially based upon the

type, complexity, and novelty of the product or disease.

and Clinical Development

tests include laboratory evaluation of product chemistry, formulation, and toxicity, as well as animal trials to assess the characteristics

and potential safety and efficacy of the product candidate.

The conduct of the preclinical tests must comply with federal regulations

and requirements, including GLPs.

The results of preclinical testing are submitted to the FDA as part of an IND application along with

other information, including information about the product candidate, chemistry, manufacturing and controls, any available human data

or literature to support the use of the product candidate and a proposed clinical trial protocol.

Long term preclinical tests, such as

animal tests of reproductive toxicity and carcinogenicity, may continue after the IND is submitted.

IND must become effective before human clinical trials may begin.

The IND automatically becomes effective 30 days after receipt by the

FDA, unless the FDA, within the 30-day period, raises safety concerns or questions relating to one or more proposed clinical trials and

places the clinical trial on clinical hold.

In such a case, the IND sponsor and the FDA must resolve any outstanding concerns or questions

before the clinical trial can begin.

The FDA may also impose clinical holds on a product candidate at any time before or during clinical

trials due to safety concerns, non-compliance or other issues affecting the integrity of the trial.

Accordingly, submission of an IND

may or may not result in the FDA allowing clinical trials to commence and, once begun, issues may arise that could cause the trial to

be suspended or terminated.

trials involve the administration of the investigational drug product to human subjects under the supervision of a qualified investigator.

are developing other formulations of imatinib for PAH, and both companies have completed Phase 1 clinical trials and indicated they each intend to pursue further clinical development.

Government Regulation

United States—FDA Process

In the United States, pharmaceutical products are subject to extensive regulation by the FDA.

The FDCA and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products.

We, along with third-party contractors, will be required to navigate the various preclinical, clinical and commercial approval requirements of the governing regulatory authorities of the countries in which we wish to conduct studies or seek approval of our product candidates.

Failure to comply with applicable United States requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending NDAs, withdrawal of an approval, warning or untitled letters, clinical holds, product recalls or withdrawals from the market, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, civil penalties, and criminal prosecution.

FDA approval is required before any new unapproved product or a product with certain changes to a previously approved product, including a new use of a previously approved drug, can be marketed in the United States.

The steps required to be completed by the FDA before a drug may be marketed in the United States generally includes the following:

● completion of preclinical laboratory tests, animal studies, and formulation studies performed in accordance with the FDA’s Good Laboratory Practice, or GLP, regulations;

● submission to the FDA of an investigational new drug, or IND, application for human clinical testing, which must become effective before human clinical trials may begin and must be updated annually or when significant changes are made;

● approval by an independent institutional review board, or IRB, or ethics committee at each clinical site before the clinical trial is commenced;

● performance of adequate and well-controlled human clinical trials in accordance with applicable IND regulations, GCP, requirements and other clinical-trial related regulations to establish the safety and efficacy of the proposed drug for each indication;

● preparation and submission to the FDA of a NDA after completion of all pivotal clinical trials, which includes not only the results of the clinical trials, but also, detailed information on the chemistry, manufacture and quality controls for the product candidate and proposed labeling;

● satisfactory completion of an FDA Advisory Committee review, if applicable;

● a determination by the FDA within 60 days of its receipt of an NDA to file the application for review;

● satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the proposed drug is produced to assess compliance with current GMP regulations and of selected clinical trial sites to assess compliance with GCPs;

● FDA review and approval of the NDA to permit commercial marketing of the product for particular indications for use in the United States.

Satisfaction of FDA pre-market approval requirements typically takes many years and the actual time required may vary substantially based upon the type, complexity, and novelty of the product or disease.

Preclinical and Clinical Development

Preclinical tests include laboratory evaluation of product chemistry, formulation, and toxicity, as well as animal trials to assess the characteristics and potential safety and efficacy of the product candidate.

The conduct of the preclinical tests must comply with federal regulations and requirements, including GLPs.

The results of preclinical testing are submitted to the FDA as part of an IND application along with other information, including information about the product candidate, chemistry, manufacturing and controls, any available human data or literature to support the use of the product candidate and a proposed clinical trial protocol.

Long term preclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue after the IND is submitted.

An IND must become effective before human clinical trials may begin.

The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day period, raises safety concerns or questions relating to one or more proposed clinical trials and places the clinical trial on clinical hold.

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

The FDA may also impose clinical holds on a product candidate at any time before or during clinical trials due to safety concerns, non-compliance or other issues affecting the integrity of the trial.

Accordingly, submission of an IND may or may not result in the FDA allowing clinical trials to commence and, once begun, issues may arise that could cause the trial to be suspended or terminated.

Clinical trials involve the administration of the investigational drug product to human subjects under the supervision of a qualified investigator.

Clinical trials must be conducted:

(i) in compliance with federal regulations;

(ii) in compliance with GCP, an international standard

meant to protect the rights and health of clinical research participants and to define the roles of clinical trial sponsors, administrators,

and monitors;

as well as (iii) under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety,

and the effectiveness criteria to be evaluated.

Each protocol involving testing on United States patients and subsequent protocol amendments

must be submitted to the FDA as part of the IND.

Furthermore, an independent IRB or ethics committee for each site proposing to conduct

the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial begins

at that site, and must monitor the study until completed.

An IRB is charged with protecting the welfare and rights of trial participants

and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in

relation to anticipated benefits.

authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects

are being exposed to an unacceptable health risk or that the trial is unlikely to meet its stated objects.

The FDA may order the temporary,

or permanent, discontinuation of a clinical trial at any time, or impose other sanctions, if it believes that the clinical trial either

is not being conducted in accordance with FDA requirements.

Further, an IRB may also require the clinical trial at the site to be halted,

either temporarily or permanently, for failure to comply with the IRB’s requirements, or may impose other conditions.

also include oversight by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring

board, which provides authorization for whether or not a study may move forward at designated check points based on access to certain

data from the study and may recommend a clinical trial to be halted if it determines that there is an unacceptable safety risk for subjects

or other grounds, such as futility.

trials to support an NDA for marketing approval are typically conducted in three sequential phases, but the phases may overlap or be

In Phase 1 clinical trials, the investigational product is typically introduced into a limited population of healthy human

subjects or patients with the target disease or condition.

These trials are designed to test the safety, dosage tolerance, pharmacokinetics

and pharmacological actions of the investigational product, to identify side effects associated with increasing doses, and, if possible,

to gain early evidence on effectiveness.

Phase 2 clinical trials usually involve administering the investigational product to a limited

patient population with the specified disease or condition to evaluate the preliminarily efficacy, dosage tolerance, and optimum dosage,

and to identify possible adverse effects and safety risks.

Phase 3 clinical trials are typically undertaken in a larger number of patients,

typically at geographically dispersed clinical trial sites, to provide substantial evidence of clinical efficacy and to further test

for safety in an expanded and diverse patient population.

These clinical trials are intended to permit the FDA to evaluate the overall

benefit-risk relationship of the investigational product and to provide adequate information for the labeling of the product candidate.

reviewing an NDA, the FDA will consider all information submitted in the NDA, including the results of all clinical trials conducted.

In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain

more information about the product.

(ii) in compliance with GCP, an international standard meant to protect the rights and health of clinical research participants and to define the roles of clinical trial sponsors, administrators, and monitors;

as well as (iii) under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated.

Each protocol involving testing on United States patients and subsequent protocol amendments must be submitted to the FDA as part of the IND.

Furthermore, an independent IRB or ethics committee for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its informed consent form before the clinical trial begins at that site, and must monitor the study until completed.

An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits.

Regulatory authorities, the IRB or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health risk or that the trial is unlikely to meet its stated objects.

The FDA may order the temporary, or permanent, discontinuation of a clinical trial at any time, or impose other sanctions, if it believes that the clinical trial either is not being conducted in accordance with FDA requirements.

Further, an IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRB’s requirements, or may impose other conditions.

Some trials also include oversight by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board, which provides authorization for whether or not a study may move forward at designated check points based on access to certain data from the study and may recommend a clinical trial to be halted if it determines that there is an unacceptable safety risk for subjects or other grounds, such as futility.

Clinical trials to support an NDA for marketing approval are typically conducted in three sequential phases, but the phases may overlap or be combined.

In Phase 1 clinical trials, the investigational product is typically introduced into a limited population of healthy human subjects or patients with the target disease or condition.

These trials are designed to test the safety, dosage tolerance, pharmacokinetics and pharmacological actions of the investigational product, to identify side effects associated with increasing doses, and, if possible, to gain early evidence on effectiveness.

Phase 2 clinical trials usually involve administering the investigational product to a limited patient population with the specified disease or condition to evaluate the preliminarily efficacy, dosage tolerance, and optimum dosage, and to identify possible adverse effects and safety risks.

Phase 3 clinical trials are typically undertaken in a larger number of patients, typically at geographically dispersed clinical trial sites, to provide substantial evidence of clinical efficacy and to further test for safety in an expanded and diverse patient population.

These clinical trials are intended to permit the FDA to evaluate the overall benefit-risk relationship of the investigational product and to provide adequate information for the labeling of the product candidate.

In reviewing an NDA, the FDA will consider all information submitted in the NDA, including the results of all clinical trials conducted.

In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more information about the product.

These so-called Phase 4 studies may be made a condition to approval of the NDA.

These trials are

used to gain additional experience from the treatment of patients in the intended therapeutic indication and further document clinical

benefit in the case of drugs approved under accelerated approval regulations.

Failure to exhibit due diligence with regard to conducting

Phase 4 clinical trials could result in the withdrawal of approval for products.

with clinical trials, companies may complete additional animal studies and develop additional information about the biological characteristics

of the product candidate, and must finalize a process for manufacturing the product in commercial quantities in accordance with current

GMP requirements.

The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among

other things, must develop methods for testing the identity, strength, quality and purity of the final product.

Additionally, appropriate

packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo

unacceptable deterioration over its shelf life.

all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical

data, and clinical study investigators.

Progress reports detailing the results of the clinical trials, among other information, must

be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and the investigators for serious

and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the product candidate,

findings from animal or in vitro testing that suggest a significant risk for human subjects, and any clinically important increase in

the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure.

Submission and Review

successful completion of the required clinical testing in accordance with all applicable regulatory requirements, an NDA application

which includes, among other information, the results of product development, preclinical studies and clinical trials are submitted to

These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication and further document clinical benefit in the case of drugs approved under accelerated approval regulations.

Failure to exhibit due diligence with regard to conducting Phase 4 clinical trials could result in the withdrawal of approval for products.

Concurrent with clinical trials, companies may complete additional animal studies and develop additional information about the biological characteristics of the product candidate, and must finalize a process for manufacturing the product in commercial quantities in accordance with current GMP requirements.

The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product.

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

During all phases of clinical development, regulatory agencies require extensive monitoring and auditing of all clinical activities, clinical data, and clinical study investigators.

Progress reports detailing the results of the clinical trials, among other information, must be submitted at least annually to the FDA, and written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected suspected adverse events, findings from other studies suggesting a significant risk to humans exposed to the product candidate, findings from animal or in vitro testing that suggest a significant risk for human subjects, and any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator brochure.

NDA Submission and Review

Assuming successful completion of the required clinical testing in accordance with all applicable regulatory requirements, an NDA application which includes, among other information, the results of product development, preclinical studies and clinical trials are submitted to the FDA.

FDA approval of the NDA is required before marketing of the product may begin in the United States.

The NDA must include, among

other things, the results of all trials and preclinical testing, and other testing and a compilation of data relating to the product’s

pharmacology, chemistry, manufacture, controls and proposed labeling.

The NDA must include, among other things, the results of all trials and preclinical testing, and other testing and a compilation of data relating to the product’s pharmacology, chemistry, manufacture, controls and proposed labeling.

The cost of preparing and submitting an NDA is substantial.

submission of most NDAs is additionally subject to a substantial application user fee, unless a waiver or exemption applies, currently

$2,875,842, as well as an annual program fee, currently $336,432.

The submission of most NDAs is additionally subject to a substantial application user fee, unless a waiver or exemption applies, currently $3,242,026, as well as an annual program fee, currently $339,933.

These fees are typically increased annually.

FDA has 60 days from its receipt of an NDA to either issue a Refuse to File Letter or accept the NDA for filing, indicating that it is

sufficiently complete to permit substantive review.

The FDA has 60 days from its receipt of an NDA to either issue a Refuse to File Letter or accept the NDA for filing, indicating that it is sufficiently complete to permit substantive review.

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

FDA has agreed to certain performance goals in the review of NDAs.

Under the Prescription Drug User Fee Act, the FDA has a goal of responding

to standard review NDAs within ten months after it accepts the application for filing, or, if the application qualifies for priority

review, six months after the FDA accepts the application for filing, but this timeframe can be extended such as by the submission of

major amendments by applicants during the review period.

The FDA reviews an NDA to determine, among other things, whether the product

is safe and effective and the facility in which it is manufactured, processed, packed or held meets standards designed to assure the

product’s continued safety, purity and potency.

FDA may refer applications for novel drug products, or drug products that present difficult questions of safety or efficacy, to an advisory

committee—typically a panel that includes clinicians and other experts—for review, evaluation, and a recommendation as to

whether the application should be approved.

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

such recommendations.

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

Under the Prescription Drug User Fee Act, the FDA has a goal of responding to standard review NDAs within ten months after it accepts the application for filing, or, if the application qualifies for priority review, six months after the FDA accepts the application for filing, but this timeframe can be extended such as by the submission of major amendments by applicants during the review period.

The FDA reviews an NDA to determine, among other things, whether the product is safe and effective and the facility in which it is manufactured, processed, packed or held meets standards designed to assure the product’s continued safety, purity and potency.

The FDA may refer applications for novel drug products, or drug products that present difficult questions of safety or efficacy, to an advisory committee—typically a panel that includes clinicians and other experts—for review, evaluation, and a recommendation as to whether the application should be approved.

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

Before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCPs.

Additionally, the FDA will inspect the facility or the facilities at which the proposed product is manufactured.

If the FDA determines

that the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission

and often will request additional testing or information.

Notwithstanding the submission of any requested additional information, the

FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

the FDA evaluates the NDA and conducts inspections of the manufacturing facilities where the investigational product and/or its drug

substance will be produced, it issues either an approval letter or a Complete Response letter.

An approval letter authorizes commercial

marketing of the drug with approved prescribing information for specific indications.

A Complete Response letter indicates that the review

cycle of the application is complete and the application is not ready for approval.

A Complete Response letter generally outlines the

deficiencies in the submission, except that where the FDA determines that the data supporting the application are inadequate to support

approval, the FDA may issue the Complete Response letter without first conducting required inspections or reviewing proposed labeling.

In issuing the Complete Response letter, the FDA may require substantial additional clinical data and/or other significant, expensive,

and time-consuming requirements related to clinical trials, preclinical studies and/or manufacturing.

If a Complete Response Letter is

issued, the applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, withdraw the application

or request a hearing.

The FDA has committed to reviewing resubmissions of the NDA addressing such deficiencies in two or six months depending

on the type of information included.

Even if such data are submitted, however, the FDA may ultimately decide that the NDA does not satisfy

the criteria for approval.

regulatory approval of a product is granted, such approval will be granted for a particular indication(s) and may include limitations

on the indicated use(s) for which such product may be marketed.

Further, the FDA may require that certain contraindications, warnings

or precautions be included in the product labeling or may condition the approval of the NDA on other changes to the proposed labeling,

development of adequate controls and specifications, or a commitment to conduct post-market testing or clinical trials and surveillance

to monitor the effects of approved products.

As a condition of NDA approval, the FDA may require a risk evaluation and mitigation strategy,

or REMS, to help ensure that the benefits of the drug outweigh the potential risks.

REMS can include medication guides, communication

plans for healthcare professionals, and elements to assure safe use, or ETASU.

ETASU can include, but are not limited to, special training

or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient

If the FDA determines that the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission and often will request additional testing or information.

Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

After the FDA evaluates the NDA and conducts inspections of the manufacturing facilities where the investigational product and/or its drug substance will be produced, it issues either an approval letter or a Complete Response letter.

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

A Complete Response letter indicates that the review cycle of the application is complete and the application is not ready for approval.

A Complete Response letter generally outlines the deficiencies in the submission, except that where the FDA determines that the data supporting the application are inadequate to support approval, the FDA may issue the Complete Response letter without first conducting required inspections or reviewing proposed labeling.

In issuing the Complete Response letter, the FDA may require substantial additional clinical data and/or other significant, expensive, and time-consuming requirements related to clinical trials, preclinical studies and/or manufacturing.

If a Complete Response Letter is issued, the applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, withdraw the application or request a hearing.

The FDA has committed to reviewing resubmissions of the NDA addressing such deficiencies in two or six months depending on the type of information included.

Even if such data are submitted, however, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval.

If regulatory approval of a product is granted, such approval will be granted for a particular indication(s) and may include limitations on the indicated use(s) for which such product may be marketed.

Further, the FDA may require that certain contraindications, warnings or precautions be included in the product labeling or may condition the approval of the NDA on other changes to the proposed labeling, development of adequate controls and specifications, or a commitment to conduct post-market testing or clinical trials and surveillance to monitor the effects of approved products.

As a condition of NDA approval, the FDA may require a risk evaluation and mitigation strategy, or REMS, to help ensure that the benefits of the drug outweigh the potential risks.

REMS can include medication guides, communication plans for healthcare professionals, and elements to assure safe use, or ETASU.

ETASU can include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of

patient registries.

The requirement for REMS can materially affect the potential market and profitability of the product.

Moreover, product approval

may also be conditioned on substantial post-approval testing, such as Phase 4 post-market studies, and surveillance to monitor the product’s

safety or efficacy, and FDA may limit further marketing of the product based on the results of these post-approval studies.

Once granted,

product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial

to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes

or facilities, require submission and FDA approval of a new NDA or NDA supplement before the change can be implemented.

An NDA supplement

for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures

and actions in reviewing NDA supplements as it does in reviewing NDAs.

As with new NDAs, the review process is often significantly extended

by the FDA requests for additional information or clarification.

NDA Approval Process

505(b)(2) of the FDCA provides an alternate regulatory pathway for the FDA to approve a new product and permits reliance for such approval

on published literature or an FDA finding of safety and effectiveness for a previously approved drug product.

Specifically, section 505(b)(2)

permits the filing of an NDA where one or more of the investigations relied upon by the applicant for approval were not conducted by

or for the applicant and for which the applicant has not obtained a right of reference.

Typically, 505(b)(2) applicants must perform

additional trials to support the change from the previously approved drug and to further demonstrate the new product’s safety and

effectiveness.

The FDA may then approve the new product candidate for all or some of the labeled indications for which the referenced

product has been approved, as well as for any new indication sought by the section 505(b)(2) applicant.

of Combination Products in the United States

products may be comprised of components, such as drug components and device components, that would normally be regulated under different

types of regulatory authorities, and frequently by different centers at the FDA.

Moreover, product approval may also be conditioned on substantial post-approval testing, such as Phase 4 post-market studies, and surveillance to monitor the product’s safety or efficacy, and FDA may limit further marketing of the product based on the results of these post-approval studies.

Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing.

Changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of a new NDA or NDA supplement before the change can be implemented.

An NDA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing NDA supplements as it does in reviewing NDAs.

As with new NDAs, the review process is often significantly extended by the FDA requests for additional information or clarification.

505(b)(2) NDA Approval Process

Section 505(b)(2) of the FDCA provides an alternate regulatory pathway for the FDA to approve a new product and permits reliance for such approval on published literature or an FDA finding of safety and effectiveness for a previously approved drug product.

Specifically, section 505(b)(2) permits the filing of an NDA where one or more of the investigations relied upon by the applicant for approval were not conducted by or for the applicant and for which the applicant has not obtained a right of reference.

Typically, 505(b)(2) applicants must perform additional trials to support the change from the previously approved drug and to further demonstrate the new product’s safety and effectiveness.

The FDA may then approve the new product candidate for all or some of the labeled indications for which the referenced product has been approved, as well as for any new indication sought by the section 505(b)(2) applicant.

Regulation of Combination Products in the United States

Certain products may be comprised of components, such as drug components and device components, that would normally be regulated under different types of regulatory authorities, and frequently by different centers at the FDA.

These products are known as combination products.

Specifically,

under regulations issued by the FDA, a combination product may be:

product comprised of two or more regulated components that are physically, chemically, or

otherwise combined or mixed and produced as a single entity;

or more separate products packaged together in a single package or as a unit and comprised

of drug and device products, device and biological products, or biological and drug products;

drug, or device, or biological product packaged separately that according to its investigational

plan or proposed labeling is intended for use only with an approved individually specified

drug, or device, or biological product where both are required to achieve the intended use,

indication, or effect and where upon approval of the proposed product the labeling of the

approved product would need to be changed, e.g., to reflect a change in intended use, dosage

form, strength, route of administration, or significant change in dose;

investigational drug, or device, or biological product packaged separately that according

to its proposed labeling is for use only with another individually specified investigational

drug, device, or biological product where both are required to achieve the intended use,

indication, or effect.

the FDCA and its implementing regulations, the FDA is charged with assigning a center with primary jurisdiction, or a lead center, for

review of a combination product.

The designation of a lead center generally eliminates the need to receive approvals from more than one

FDA component for combination products, although it does not preclude consultations by the lead center with other components of FDA.

Specifically, under regulations issued by the FDA, a combination product may be:

● a product comprised of two or more regulated components that are physically, chemically, or otherwise combined or mixed and produced as a single entity;

● two or more separate products packaged together in a single package or as a unit and comprised of drug and device products, device and biological products, or biological and drug products;

● a drug, or device, or biological product packaged separately that according to its investigational plan or proposed labeling is intended for use only with an approved individually specified drug, or device, or biological product where both are required to achieve the intended use, indication, or effect and where upon approval of the proposed product the labeling of the approved product would need to be changed, e.g., to reflect a change in intended use, dosage form, strength, route of administration, or significant change in dose;

● any investigational drug, or device, or biological product packaged separately that according to its proposed labeling is for use only with another individually specified investigational drug, device, or biological product where both are required to achieve the intended use, indication, or effect.

Under the FDCA and its implementing regulations, the FDA is charged with assigning a center with primary jurisdiction, or a lead center, for review of a combination product.

The designation of a lead center generally eliminates the need to receive approvals from more than one FDA component for combination products, although it does not preclude consultations by the lead center with other components of FDA.

The determination of which center will be the lead center is based on the “primary mode of action” of the combination product.

Thus, if the primary mode of action of a drug-device combination product is attributable to the drug product, the FDA center responsible

for premarket review of the drug product would have primary jurisdiction for the combination product.

The FDA has also established an

Office of Combination Products to address issues surrounding combination products and provide more certainty to the regulatory review

Thus, if the primary mode of action of a drug-device combination product is attributable to the drug product, the FDA center responsible for premarket review of the drug product would have primary jurisdiction for the combination product.

The FDA has also established an Office of Combination Products to address issues surrounding combination products and provide more certainty to the regulatory

review process.

That office serves as a focal point for combination product issues for agency reviewers and industry.

It is also responsible

for developing guidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that

has primary jurisdiction for review of combination products where the jurisdiction is unclear or in dispute.

combination product with a drug primary mode of action generally would be reviewed and approved pursuant to the drug approval processes

under the FDCA.

In reviewing the NDA application for such a product, however, FDA reviewers in the drug center could consult with their

counterparts in the device center to ensure that the device component of the combination product met applicable requirements regarding

safety, effectiveness, durability and performance.

In addition, under FDA regulations, combination products are subject to current GMP

requirements applicable to both drugs and devices, including the Quality System, or QS, regulations applicable to medical devices.

Post-Approval

an NDA is approved, a product will be subject to pervasive and continuing regulation by the FDA including, among other things, requirements

relating to current GMPs, quality controls, record-keeping, reporting of adverse experiences, periodic reporting, product sampling and

distribution, and advertising and promotion of the product.

For instance, the FDA closely regulates the post-approval marketing and promotion

of drugs, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific

and educational activities and promotional activities involving the internet.

Drugs may be marketed only for the approved indications

and in accordance with the provisions of the approved labeling.

Failure to comply with these requirements can result in adverse publicity,

warning letters, corrective advertising, and potential civil and criminal penalties.

Physicians may prescribe legally available products

for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA.

off-label uses are common across medical specialties.

Physicians may believe that such off-label uses are the best treatment for many

patients in varied circumstances.

It is also responsible for developing guidance and regulations to clarify the regulation of combination products, and for assignment of the FDA center that has primary jurisdiction for review of combination products where the jurisdiction is unclear or in dispute.

A combination product with a drug primary mode of action generally would be reviewed and approved pursuant to the drug approval processes under the FDCA.

In reviewing the NDA application for such a product, however, FDA reviewers in the drug center could consult with their counterparts in the device center to ensure that the device component of the combination product met applicable requirements regarding safety, effectiveness, durability and performance.

In addition, under FDA regulations, combination products are subject to current GMP requirements applicable to both drugs and devices, including the Quality System, or QS, regulations applicable to medical devices.

Post-Approval Requirements

Once an NDA is approved, a product will be subject to pervasive and continuing regulation by the FDA including, among other things, requirements relating to current GMPs, quality controls, record-keeping, reporting of adverse experiences, periodic reporting, product sampling and distribution, and advertising and promotion of the product.

For instance, the FDA closely regulates the post-approval marketing and promotion of drugs, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet.

Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved labeling.

Failure to comply with these requirements can result in adverse publicity, warning letters, corrective advertising, and potential civil and criminal penalties.

Physicians may prescribe legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA.

Such off-label uses are common across medical specialties.

Physicians may believe that such off-label uses are the best treatment for many patients in varied circumstances.

The FDA does not regulate the practice of medicine by physicians or their choice of treatments.

FDA does, however, regulate manufacturer’s communications on the subject of off-label use of their products.

addition, quality control, drug manufacture, packaging, and labeling procedures must continue to conform to current GMPs after approval.

Drug manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state agencies,

and are subject to periodic unannounced inspections by the FDA, and certain state agencies for compliance with current GMPs, which impose

certain organizational, procedural and documentation requirements with respect to manufacturing and quality assurance activities.

to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval

before being implemented.

FDA regulations also require investigation and correction of any deviations from current GMPs and impose reporting

requirements upon us and any third-party manufacturers that we may decide to use.

NDA holders using contract manufacturers, laboratories

or packagers are responsible for the selection and monitoring of qualified firms, and, in certain circumstances, qualified suppliers

to these firms.

Drug manufacturers and other parties involved in the drug supply chain for prescription drug products must also comply

with product tracking and tracing requirements and for notifying the FDA of counterfeit, diverted, stolen and intentionally adulterated

products or products that are otherwise unfit for distribution in the United States.

The discovery of violative conditions, including

failure to conform to current GMP, could result in enforcement actions that interrupt the operation of any such facilities or the ability

to distribute products manufactured, processed or tested by them.

Accordingly, manufacturers must continue to expend time, money, and

effort in the areas of production and quality-control to maintain compliance with current GMPs.

FDA may withdraw product approvals or request product recalls if a company fails to comply with regulatory standards or is not maintained,

if problems occur following initial marketing, or if previously unrecognized problems are subsequently discovered.

Later discovery of

previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes,

or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information;

of post-market studies or clinical trials to assess new safety risks;

or imposition of distribution restrictions or other restrictions

under a REMS program.

The FDA does, however, regulate manufacturer’s communications on the subject of off-label use of their products.

In addition, quality control, drug manufacture, packaging, and labeling procedures must continue to conform to current GMPs after approval.

Drug manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA, and certain state agencies for compliance with current GMPs, which impose certain organizational, procedural and documentation requirements with respect to manufacturing and quality assurance activities.

Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented.

FDA regulations also require investigation and correction of any deviations from current GMPs and impose reporting requirements upon us and any third-party manufacturers that we may decide to use.

NDA holders using contract manufacturers, laboratories or packagers are responsible for the selection and monitoring of qualified firms, and, in certain circumstances, qualified suppliers to these firms.

Drug manufacturers and other parties involved in the drug supply chain for prescription drug products must also comply with product tracking and tracing requirements and for notifying the FDA of counterfeit, diverted, stolen and intentionally adulterated products or products that are otherwise unfit for distribution in the United States.

The discovery of violative conditions, including failure to conform to current GMP, could result in enforcement actions that interrupt the operation of any such facilities or the ability to distribute products manufactured, processed or tested by them.

Accordingly, manufacturers must continue to expend time, money, and effort in the areas of production and quality-control to maintain compliance with current GMPs.

The FDA may withdraw product approvals or request product recalls if a company fails to comply with regulatory standards or is not maintained, if problems occur following initial marketing, or if previously unrecognized problems are subsequently discovered.

Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information;

imposition of post-market studies or clinical

trials to assess new safety risks;

or imposition of distribution restrictions or other restrictions under a REMS program.

Other potential consequences include, among other things:

● restrictions

on the marketing or manufacturing of a product, complete withdrawal of the product from the

market or product recalls;

warning letters or holds on post-approval clinical trials;

of the FDA to approve pending applications or supplements to approved applications, or suspension

or revocation of existing product approvals;

seizure or detention, or refusal of the FDA to permit the import or export of products;

decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs;

modification of promotional materials and labeling and the issuance of corrective information;

issuance of safety alerts, Dear Healthcare Provider letters, press releases and other communications

containing warnings or other safety information about the product;

● injunctions

or the imposition of civil or criminal penalties.

● restrictions on the marketing or manufacturing of a product, complete withdrawal of the product from the market or product recalls;

● fines, warning letters or holds on post-approval clinical trials;

● refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of existing product approvals;

● product seizure or detention, or refusal of the FDA to permit the import or export of products;

● consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs;

● mandated modification of promotional materials and labeling and the issuance of corrective information;

● the issuance of safety alerts, Dear Healthcare Provider letters, press releases and other communications containing warnings or other safety information about the product;

● injunctions or the imposition of civil or criminal penalties.

Patent Term Restoration

upon the timing, duration and specifics of the potential FDA approval of AV-101 and any future product candidates, some of our U.S.

may be eligible for limited patent term extension.

The Hatch-Waxman Amendments permit a patent restoration term, often referred to as

patent term extension, of up to five years as compensation for patent term lost during product development and the FDA regulatory review

However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product’s

approval date.

The patent term restoration period is generally one-half the time between the effective date of an IND and the submission

date of an NDA plus the time between the submission date of an NDA and the approval of that application.

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

Depending upon the timing, duration and specifics of the potential FDA approval of AV-101 and any future product candidates, some of our U.S.

patents may be eligible for limited patent term extension.

The Hatch-Waxman Amendments permit a patent restoration term, often referred to as patent term extension, of up to five years 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.

The patent term restoration period is generally one-half the time between the effective date of an IND and the submission date of an NDA plus the time between the submission date of an NDA and the approval of that application.

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 or denies the application for any patent term extension or restoration.

In the future, we intend to apply for extension of patent term for one of our patents covering AV-101 to add patent life beyond its current

expected expiration date.

In the future, we intend to apply for extension of patent term for one of our patents covering AV-101 to add patent life beyond its current expected expiration date.

Marketing Exclusivity

exclusivity provisions under the FDCA can also delay the submission or the approval of certain marketing applications, including 505(b)(2)

applications.

The FDA provides three years of marketing exclusivity for an NDA (including a 505(b)(2) application), 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.

Three-year exclusivity is typically awarded to innovative changes

to a previously-approved drug product, such as new indications, dosage forms or strengths.

This three-year exclusivity covers only the

modification for which the drug received approval on the basis of the new clinical investigations and does not prohibit the FDA from

approving applications for drugs that do not have the innovative change, such as generic copies of the original, unmodified drug product.

Three-year exclusivity blocks approval of 505(b)(2) applications and abbreviated new drug applications, or ANDAs, but will not delay

the submission or approval of a full NDA.

However, an applicant submitting a full NDA would be required to conduct or obtain a right

of reference to all of the nonclinical studies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.

Market exclusivity provisions under the FDCA can also delay the submission or the approval of certain marketing applications, including 505(b)(2) applications.

The FDA provides three years of marketing exclusivity for an NDA (including a 505(b)(2) application), 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.

Three-year exclusivity is typically awarded to innovative changes to a previously-approved drug product, such as new indications, dosage forms or strengths.

This three-year exclusivity covers only the modification for which the drug received approval on the basis of the new clinical investigations and does not prohibit the FDA from approving applications for drugs that do not have the innovative change, such as generic copies of the original, unmodified drug product.

Three-year exclusivity blocks approval of 505(b)(2) applications and Abbreviated New Drug Applications, or ANDAs, but will not delay the submission or approval of a full NDA.

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

Orphan drug exclusivity, as described above, may offer a seven-year period of marketing exclusivity, except in certain circumstances.

Pediatric exclusivity is another type of regulatory market exclusivity in the United States.

Pediatric exclusivity, if granted, adds

six months to existing exclusivity periods, including exclusivity attaching to certain patent certifications.

This six-month exclusivity,

which runs from the end of other exclusivity protection and patent terms, may be granted based on the voluntary completion within certain

timeframes of a pediatric trial in accordance with an FDA-issued “Written Request” for such a trial.

Drug Designation

the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition—generally

a disease or condition with either a patient population that affects fewer than 200,000 individuals in the United States or a patient

population greater than 200,000 individuals in the United States and there is no reasonable expectation that the cost of developing and

making available the drug will be recovered from sales of the drug in the United States.

Orphan drug designation must be requested before

submitting an NDA.

After the FDA grants orphan drug designation, the generic identity of the product and its potential orphan use are

disclosed publicly by the FDA.

Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review

and approval process.

first NDA applicant to receive FDA approval for a particular active ingredient to treat a particular disease with FDA orphan drug designation

is entitled to a seven-year exclusive marketing period in the United States for that product, for that indication.

During the seven-year

exclusivity period, the FDA may not approve any other applications to market the same product for the same disease, except in limited

circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or if the FDA finds that the holder

of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet

the needs of the patients with the disease or condition for which the product was designated.

Orphan drug exclusivity does not prevent

the FDA from approving a different product for the same disease or condition, or the same product for a different disease or condition.

Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA or BLA application user

designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which

it received orphan drug designation.

In addition, orphan drug exclusive marketing rights in the United States may be lost if the FDA

later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities

of the product to meet the needs of patients with the rare disease or condition.

Track Designation, Breakthrough Therapy Designation and Accelerated Approval

FDA is required to facilitate the development, and expedite the review, of drugs that are intended for the treatment of a serious or

life-threatening disease or condition which demonstrate the potential to address unmet medical needs for the condition.

These programs

include fast track designation, priority review and accelerated approval.

product candidate is eligible for fast track designation if it is intended to treat a serious or life-threatening disease or condition

and demonstrates the potential to address unmet medical needs for such disease or condition.

Fast track designation applies to the combination

of the product and the specific indication for which it is being studied.

Under the fast track program, the sponsor of a drug candidate

may request that the FDA designate the candidate for a specific indication as a fast track product concurrent with, or after, the filing

of the IND for the candidate.

The FDA must determine if the product candidate qualifies for fast track designation within 60 days of

receipt of the sponsor’s request.

Fast track designation provides increased opportunities for sponsor interactions with the FDA

during preclinical and clinical development, in addition to the potential for rolling review of sections of a the applicant’s NDA

before the application is complete.

This rolling review is available if the applicant provides, and the FDA approves, a schedule for

the submission of the remaining information and the applicant pays applicable user fees.

However, the FDA’s time period goal for

reviewing an application does not begin until the last section of the NDA is submitted.

Additionally, the fast track designation may

be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.

the FDA’s breakthrough therapy program, a sponsor may seek FDA designation of its product candidate as a breakthrough therapy if the

product candidate is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening

disease or condition and preliminary clinical evidence indicates that it may demonstrate substantial improvement over existing therapies

on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.

therapy designation comes with all of the benefits of fast track designation.

The FDA may take other actions appropriate to expedite

the development and review of the product candidate, including intensive guidance on an efficient product development program beginning

as early as Phase 1, and FDA organizational commitment to expedited development, including involvement of senior managers and experienced

review staff in a cross-disciplinary review, where appropriate.

product submitted to the FDA for marketing, including under the fast track or breakthrough designation program, may also be eligible

for other types of FDA programs intended to expedite development and review, such as accelerated approval.

Products are eligible for

accelerated approval if they can be shown to have an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit,

or on a clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality, that is reasonably likely

to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence

of the condition and the availability or lack of alternative treatments.

clinical trials, a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes for

a direct measurement of how a patient feels, functions, or survives.

Surrogate endpoints can often be measured more easily or more rapidly

than clinical endpoints.

A product candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including

the completion of Phase 4, or post-approval, clinical trials to confirm the effect on the clinical endpoint.

Failure to conduct required

post-approval studies with diligence, or confirm a clinical benefit during post-marketing studies, will allow the FDA to withdraw the

product from the market on an expedited basis.

All promotional materials for product candidates approved under accelerated regulations

are subject to prior review by the FDA unless otherwise informed by the FDA.

product is eligible for priority review if it has the potential to provide a significant improvement in safety or effectiveness in the

treatment, diagnosis or prevention of a serious disease or condition.

A priority review means that the goal for the FDA to review an

application is six months, rather than the standard review of ten months under current Prescription Drug User Fee Act, or PDUFA, guidelines.

Under the new PDUFA agreement, these six and ten month review periods are measured from the “filing” date rather than the

receipt date for NDAs for new molecular entities, which typically adds approximately two months to the timeline for review and decision

from the date of submission.

Most products that are eligible for fast track designation are also likely to be considered appropriate

to receive a priority review.

the Pediatric Research Equity Act, or PREA, NDAs or supplements to NDAs must contain data to assess the safety and effectiveness of the

drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric

subpopulation for which the drug is safe and effective.

Pediatric exclusivity, if granted, adds six months to existing exclusivity periods, including exclusivity attaching to certain patent certifications.

This six-month exclusivity, which runs from the

end of other exclusivity protection and patent terms, may be granted based on the voluntary completion within certain timeframes of a pediatric trial in accordance with an FDA-issued “Written Request” for such a trial.

Orphan Drug Designation

Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition—generally a disease or condition with either a patient population that affects fewer than 200,000 individuals in the United States or a patient population greater than 200,000 individuals in the United States and there is no reasonable expectation that the cost of developing and making available the drug will be recovered from sales of the drug in the United States.

Orphan drug designation must be requested before submitting an NDA.

After the FDA grants orphan drug designation, the generic identity of the product and its potential orphan use are disclosed publicly by the FDA.

Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

The first NDA applicant to receive FDA approval for a particular active ingredient to treat a particular disease with FDA orphan drug designation is entitled to a seven-year exclusive marketing period in the United States for that product, for that indication.

During the seven-year exclusivity period, the FDA may not approve any other applications to market the same product for the same disease, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or if the FDA finds that the holder of the orphan drug exclusivity has not shown that it can assure the availability of sufficient quantities of the orphan drug to meet the needs of the patients with the disease or condition for which the product was designated.

Orphan drug exclusivity does not prevent the FDA from approving a different product for the same disease or condition, or the same product for a different disease or condition.

Among the other benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA or BLA application user fee.

A designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan drug designation.

In addition, orphan drug exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition.

Fast Track Designation, Breakthrough Therapy Designation and Accelerated Approval

The FDA is required to facilitate the development, and expedite the review, of drugs that are intended for the treatment of a serious or life-threatening disease or condition which demonstrate the potential to address unmet medical needs for the condition.

These programs include fast track designation, priority review and accelerated approval.

A product candidate is eligible for fast track designation if it is intended to treat a serious or life-threatening disease or condition and demonstrates the potential to address unmet medical needs for such disease or condition.

Fast track designation applies to the combination of the product and the specific indication for which it is being studied.

Under the fast track program, the sponsor of a drug candidate may request that the FDA designate the candidate for a specific indication as a fast track product concurrent with, or after, the filing of the IND for the candidate.

The FDA must determine if the product candidate qualifies for fast track designation within 60 days of receipt of the sponsor’s request.

Fast track designation provides increased opportunities for sponsor interactions with the FDA during preclinical and clinical development, in addition to the potential for rolling review of sections of a the applicant’s NDA before the application is complete.

This rolling review is available if the applicant provides, and the FDA approves, a schedule for the submission of the remaining information and the applicant pays applicable user fees.

However, the FDA’s time period goal for reviewing an application does not begin until the last section of the NDA is submitted.

Additionally, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.

Under the FDA’s breakthrough therapy program, a sponsor may seek FDA designation of its product candidate as a breakthrough therapy if the product candidate is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that it may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as

substantial treatment effects observed early in clinical development.

Breakthrough therapy designation comes with all of the benefits of fast track designation.

The FDA may take other actions appropriate to expedite the development and review of the product candidate, including intensive guidance on an efficient product development program beginning as early as Phase 1, and FDA organizational commitment to expedited development, including involvement of senior managers and experienced review staff in a cross-disciplinary review, where appropriate.

Any product submitted to the FDA for marketing, including under the fast track or breakthrough designation program, may also be eligible for other types of FDA programs intended to expedite development and review, such as accelerated approval.

Products are eligible for accelerated approval if they can be shown to have an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments.

In clinical trials, a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes for a direct measurement of how a patient feels, functions, or survives.

Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints.

A product candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the conduct of Phase 4, or post-approval, clinical trials to confirm the effect on the clinical endpoint which must be conducted with due diligence and, under the Food and Drug Omnibus Reform Act of 2022, or FDORA, the FDA may require, as appropriate, that such trials be underway prior to approval or within a specific time period after the date accelerated approval is granted.

Additionally, under FDORA, the FDA has increased authority for expedited procedures to withdraw a product or indication approved under accelerated approval if, for example, the confirmatory trial fails to verify the predicted clinical benefit of the product.

All promotional materials for product candidates approved under accelerated regulations are subject to prior review by the FDA unless otherwise informed by the FDA.

Priority Review

A product is eligible for priority review if it has the potential to provide a significant improvement in safety or effectiveness in the treatment, diagnosis or prevention of a serious disease or condition.

A priority review means that the goal for the FDA to review an application is six months, rather than the standard review of ten months under current Prescription Drug User Fee Act, or PDUFA, guidelines.

Under the current PDUFA agreement, these six and ten month review periods are measured from the “filing” date rather than the receipt date for NDAs for new molecular entities, which typically adds approximately two months to the timeline for review and decision from the date of submission.

Most products that are eligible for fast track designation are also likely to be considered appropriate to receive a priority review.

Pediatric Information

Under the Pediatric Research Equity Act, or PREA, NDAs or supplements to NDAs must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective.

The FDA may grant full or partial waivers, or deferrals, for submission of data.

Unless otherwise required by regulation, PREA does not apply to any drug for an indication for which orphan designation has been granted.

of Clinical Trial Information

of clinical trials of FDA-regulated products, including drugs and combination products, are required to register and disclose certain

clinical trial information.

Information related to the product, patient population, phase of investigation, trial sites and investigators,

and other aspects of the clinical trial is then made public as part of the registration.

Sponsors are also obligated to disclose the

results of their clinical trials after completion.

Competitors may use this publicly available information to gain knowledge regarding

the progress of development programs.

Disclosure of the results of these trials can be delayed until the new product or new indication

being studied has been approved.

Failure to timely register a covered clinical study or to submit study results as provided for in the

law can give rise to civil monetary penalties and also prevent the non-compliant party from receiving future grant funds from the federal

The Final Rule on ClinicalTrials.gov registration and reporting requirements became effective in 2017, and both the National

Institutes of Health and the FDA recently signaled the government’s willingness to begin enforcing those requirements against non-compliant

clinical trial sponsors.

Union—Process

the European Union, or EU, our product candidate(s) may also be subject to extensive regulatory requirements governing, among other things,

clinical trials and any commercial sales and distribution of our product candidate(s).

or not we obtain FDA approval for a product candidate, we must obtain the requisite approvals from regulatory authorities located in

the EU Member States prior to the commencement of clinical trials as well as EU or national regulatory approvals prior to marketing the

product candidate(s).

Studies and Clinical Trials

to the United States, the various phases of non-clinical studies and clinical trials in the EU are subject to significant regulatory

studies are performed to demonstrate the health or environmental safety of new chemical substances.

Non-clinical studies must be conducted

in compliance with the principles of good laboratory practice, or GLP, as set forth in EU Directive 2004/10/EC.

In particular, non-clinical

studies, both in vitro and in vivo, must be planned, performed, monitored, recorded, reported and archived in accordance with the GLP

principles, which define a set of rules and criteria for a quality system for the organizational process and the conditions for non-clinical

Disclosure of Clinical Trial Information

Sponsors of clinical trials of FDA-regulated products, including drugs and combination products, are required to register and disclose certain clinical trial information.

Information related to the product, patient population, phase of investigation, trial sites and investigators, and other aspects of the clinical trial is then made public as part of the registration.

Sponsors are also obligated to disclose the results of their clinical trials after completion.

Competitors may use this publicly available information to gain knowledge regarding the progress of development programs.

Disclosure of the results of these trials can be delayed until the new product or new indication being studied has been approved.

Failure to timely register a covered clinical study or to submit study results as provided for in the law can give rise to civil monetary penalties and also prevent the non-compliant party from receiving future grant funds from the federal government.

The Final Rule on

ClinicalTrials.gov registration and reporting requirements became effective in 2017, and both the National Institutes of Health and the FDA recently signaled the government’s willingness to begin enforcing those requirements against non-compliant clinical trial sponsors.

European Union—Process

In the European Union, or EU, our product candidate(s) may also be subject to extensive regulatory requirements governing, among other things, clinical trials and any commercial sales and distribution of our product candidate(s).

Whether or not we obtain FDA approval for a product candidate, we must obtain the requisite approvals from regulatory authorities located in the EU Member States prior to the commencement of clinical trials as well as EU or national regulatory approvals prior to marketing the product candidate(s).

Non-Clinical Studies and Clinical Trials

Similar to the United States, the various phases of non-clinical studies and clinical trials in the EU are subject to significant regulatory controls.

Non-clinical studies are performed to demonstrate the health or environmental safety of new chemical substances.

Non-clinical studies must be conducted in compliance with the principles of good laboratory practice, or GLP, as set forth in EU Directive 2004/10/EC.

In particular, non-clinical studies, both in vitro and in vivo, must be planned, performed, monitored, recorded, reported and archived in accordance with the GLP principles, which define a set of rules and criteria for a quality system for the organizational process and the conditions for non-clinical studies.

These GLP standards reflect the Organization for Economic Co-operation and Development requirements.

trials of medicinal products in the EU must be conducted in accordance with the EU Clinical Trials Regulation (EU) No 536/2014, or CTR,

(which was adopted in April 2014, and repealed the EU Clinical Trials Directive 2001/20/EC on January 31, 2022), and the International

Conference on Harmonization, or ICH, guidelines on GCP, as well as the applicable regulatory requirements and the ethical principles

that have their origin in the Declaration of Helsinki.

If the sponsor of the clinical trial is not established within the EU, it must

appoint an EU entity to act as its legal representative.

The sponsor must take out a clinical trial insurance policy, and in most EU

Member States, the sponsor is liable to provide ‘no fault’ compensation to any study subject injured in the clinical trial.

CTR is directly applicable in all Member States (meaning that no national implementing legislation in each EU Member State is required).

Under the CTR, there is a centralized application procedure where one national authority takes the lead in reviewing the application

and the other national authorities have only limited involvement (instead of submitting applications separately to each national competent

authority and ethics committee in the Member States in which the trial will be conducted, as was the case under the previous EU Clinical

Trials Directive).

The CTR also makes it more efficient for EU Member States to evaluate and authorize applications together, via the

Clinical Trials Information System.

Clinical trials of medicinal products in the EU must be conducted in accordance with the EU Clinical Trials Regulation (EU) No 536/2014, or CTR, (which was adopted in April 2014, and repealed the EU Clinical Trials Directive 2001/20/EC on January 31, 2022), and the International Conference on Harmonization, or ICH, guidelines on GCP, as well as the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki.

If the sponsor of the clinical trial is not established within the EU, it must appoint an EU entity to act as its legal representative (unless all EU Member States in which the trial is being conducted have chosen not to apply such rule, in which case it may be that only a contact person in the EU is required), who shall be responsible for ensuring compliance with the sponsor’s obligations under the CTR and be the addressee for all communications provided for under the CTR.

The sponsor must take out a clinical trial insurance policy, and in most EU Member States, the sponsor is liable to provide ‘no fault’ compensation to any study subject injured in the clinical trial.

The CTR is directly applicable in all Member States (meaning that no national implementing legislation in each EU Member State is required).

Under the CTR, there is a centralized application procedure where one national authority takes the lead in reviewing the application and the other national authorities have only limited involvement (instead of submitting applications separately to each national competent authority and ethics committee in the Member States in which the trial will be conducted, as was the case under the previous EU Clinical Trials Directive).

The CTR also makes it more efficient for EU Member States to evaluate and authorize applications together, via the Clinical Trials Information System.

Medicines used in clinical trials must be manufactured in accordance with GMP.

Other national and

EU-wide regulatory requirements may also apply.

of Clinical Trial Information

CTR significantly enlarges the publication and transparency obligations for clinical trial sponsors from the previous position under

the Clinical Trials Directive.

Additionally, the CTR requires that EU Member States adopt specific measures, including penalties, to

adequately sanction infringements of the relevant transparency obligations.

Authorizations

the EU, medicinal products can only be placed on the market after obtaining a marketing authorization, or MA.

To obtain regulatory approval

of an investigational medicinal product under EU regulatory systems, we must submit a marketing authorization application, or MAA.

process for doing this depends, among other things, on the nature of the medicinal product.

the centralized procedure, the European Commission issues a single MA, based on the opinion of the European Medicines Agency’s,

or EMA, Committee for Medicinal Products for Human Use, or CHMP, which is valid across the entire territory of the EU, as well as Iceland,

Liechtenstein and Norway (i.e.

Other national and EU-wide regulatory requirements may also apply.

Disclosure of Clinical Trial Information

The CTR significantly enlarges the publication and transparency obligations for clinical trial sponsors from the previous position under the Clinical Trials Directive.

Additionally, the CTR requires that EU Member States adopt specific measures, including penalties, to adequately sanction infringements of the relevant transparency obligations.

Marketing Authorisations

In the EU, medicinal products can only be placed on the market after obtaining a marketing authorisation, or MA.

To obtain regulatory approval of a product in the EU, we must submit a MAA.

The process for doing this depends, among other things, on the nature of the medicinal product.

Centralized Procedure

Under the centralized procedure, the European Commission issues a single MA, based on the opinion of the European Medicines Agency’s, or EMA, Committee for Medicinal Products for Human Use, or CHMP, which is valid across the entire territory of the EU, as well as Iceland, Liechtenstein and Norway (i.e.

the European Economic Area, or EEA).

The centralized procedure is compulsory for human medicines that

The centralized procedure is compulsory for human medicines that are:

(i) derived from biotechnology processes;

(ii) advanced-therapy medicinal products (i.e.

gene therapy, somatic cell-therapy or tissue-engineered

(iii) contain a new active substance indicated for the treatment of certain diseases, such as HIV or AIDS, cancer, diabetes,

neurodegenerative diseases, viral diseases or autoimmune diseases and other immune dysfunctions;

and (iv) officially designated orphan

For medicines that do not fall within these categories, an applicant has the option of submitting an application for a centralized

MA to the EMA, if the product contains a new active substance not yet authorized in the EU, or the medicine concerned is a significant

therapeutic, scientific or technical innovation, or that the granting of authorization would be in the interest of public health at EU-level.

the centralized procedure the maximum timeframe for the evaluation of an MAA by the EMA is 210 days, excluding clock stops, when additional

written or oral information is to be provided by the applicant in response to questions asked by the CHMP.

Clock stops may extend the

timeframe of evaluation of an MAA considerably beyond 210 days.

Where the CHMP gives a positive opinion, the EMA provides the opinion

together with supporting documentation to the European Commission, who make the final decision to grant a MA, which is issued within

67 days of receipt of the EMA’s recommendations.

Accelerated assessment may be granted by the CHMP in exceptional cases, when a

medicinal product is of major interest from the point of view of public health and, in particular, from the viewpoint of therapeutic

Accelerated assessment of an MAA might be performed by the CHMP in no more than 150 days (not including clock stops) but

it is possible that the CHMP may revert to the standard time limit for the centralized procedure if it determines that the application

is no longer appropriate to conduct an accelerated assessment.

Innovative products that target an unmet medical need (there is no satisfactory

method of diagnosis, prevention or treatment in the EU or, if there is, the new medicine will bring a major therapeutic advantage) may

be eligible for a number of expedited development and review programs, such as the PRIME scheme, which provides incentives similar to

the breakthrough therapy designation in the United States.

PRIME is a voluntary scheme aimed at enhancing the EMA’s support for

the development of medicines that target unmet medical needs.

It is based on increased interaction and early dialogue with companies

developing promising medicines, to optimize their product development plans and speed up their evaluation to help them reach patients

Product developers that benefit from PRIME designation can expect to be eligible for accelerated assessment but this is not

The benefits of a PRIME designation include the appointment of a CHMP rapporteur before submission of an MAA, early dialogue

and scientific advice at key development milestones, and the potential to qualify products for accelerated review earlier in the application

Authorization Procedures

are also two other possible routes to authorize medicinal products in several Member States.

National MAs are issued by the national

competent authorities of the EU Member States and only cover their respective territory.

They are available for products that fall outside

the scope of the centralized procedure:

● Decentralized

If the product has not received a national MA in any member state at the time

of application, an applicant may apply for simultaneous MA in more than one EU Member States.

EU Member States.

Under the decentralized procedure an identical dossier is submitted to

the national competent authority of each of the Member States in which the MA is sought,

one of which is selected by the applicant as the Reference Member State.

recognition procedure.

Under the mutual recognition procedure, a medicine that has already

been authorized in one EU Member State, in accordance with the national procedures of that

member state, can be recognized in another Member State.

have an initial duration of five years.

After these five years, the authorization may be renewed for an unlimited period on the basis

of a reevaluation of the risk-benefit balance.

to the United States, there is a process for authorization of generic/biosimilar versions of innovator drug products authorized in the

Abridged applications for the authorization of generic/biosimilar versions of drugs authorized via the EU centralized procedure can

be submitted to the EMA through the centralized procedure referencing the innovator’s data.

and Market Exclusivity

the EU, innovative medicinal products approved on the basis of a complete independent data package qualify for eight years of data exclusivity

upon grant of a marketing authorization and an additional two years of market exclusivity.

Data exclusivity prevents generic and biosimilar

applicants from referencing the innovator’s preclinical and clinical trial data contained in the dossier of the reference product

when applying for a marketing authorization for a period of eight years from the date on which the reference product was first authorized

During the additional two-year period of market exclusivity, a generic or biosimilar marketing authorization application can

be submitted, and the innovator’s data may be referenced, but no generic or biosimilar medicinal product can be marketed until

the expiration of the market exclusivity period.

The overall 10-year period will be extended to a maximum of 11 years if, during the

first eight years of those 10 years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications

which, during the scientific evaluation prior to authorization, is held to bring a significant clinical benefit in comparison with existing

There is no guarantee that a product will be considered by the EMA to be an innovative medicinal product, and products may

not qualify for data exclusivity.

Even if a product is considered to be an innovative medicinal product so that the innovator gains the

prescribed period of data exclusivity, another company may market another version of the product if such company obtained marketing authorization

based on an MAA with a completely independent data package of pharmaceutical tests, preclinical tests and clinical trials.

Medicinal Products

criteria for designating an “orphan medicinal product” in the EU are similar in principle to those in the United States.

A medicinal product may be designated as orphan if (1) it is intended for the diagnosis, prevention or treatment of life-threatening

or chronically debilitating conditions;

(2) either (a) such condition affects no more than 5 in 10,000 persons in the EU when the application

is made, or (b) it is unlikely that the marketing of the product, without the benefits derived from orphan status, would generate sufficient

return in the EU to justify the necessary investment in its development;

and (3) there exists no satisfactory method of diagnosis, prevention

or treatment of such condition authorized for marketing in the EU or, if such a method exists, the product in question would be of significant

benefit compared to products available for the condition.

the EU, orphan designation entitles a party to financial incentives such as reduction of fees or fee waivers, regulatory assistance and

the possibility to apply for a centralized marketing authorization.

The application for orphan designation must be submitted before the

application for marketing authorization.

Orphan designation does not convey any advantage in, or shorten the duration of, the regulatory

review and approval process.

The grant of an MA for an orphan medicinal products leads to ten years of market exclusivity.

ten-year market exclusivity period, the EMA cannot accept an MAA, or grant an MA, or accept an application to extend an MA, for the same

therapeutic indication, in respect of a “similar medicinal product”.

A “similar medicinal product” is defined

as a medicinal product containing a similar active substance or substances as contained in an authorized orphan medicinal product, and

which is intended for the same therapeutic indication.

An orphan product can also obtain an additional two years of market exclusivity

in the EU for pediatric studies.

No extension to any supplementary protection certificate can be granted on the basis of pediatric studies

for orphan indications.

Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and

approval process.

10-year market exclusivity may be reduced to six years if, at the end of the fifth year, it is established that the orphan designation

criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market

At any time, MA may be granted to a similar medicinal product for the same therapeutic indication if:

(i) a second applicant

can establish that its product, although similar to the authorized product, is safer, more effective or otherwise clinically superior;

gene therapy, somatic cell-therapy or tissue-engineered medicines);

(iii) contain a new active substance indicated for the treatment of certain diseases, such as HIV or AIDS, cancer, diabetes, neurodegenerative diseases, viral diseases or autoimmune diseases and other immune dysfunctions;

and (iv) officially designated orphan medicines.

For medicines that do not fall within these categories, an applicant has the option of submitting an application for a centralized MA to the EMA if the product contains a new active substance not yet authorized in the EU, or the medicine concerned is a significant therapeutic, scientific or technical innovation, or that the granting of a centralized authorization would be in the interest of public health at EU-level.

Under the centralized procedure the maximum timeframe for the evaluation of an MAA by the EMA is 210 days, excluding clock stops, when additional written or oral information is to be provided by the applicant in response to questions asked by the CHMP.

Clock stops may extend the timeframe of evaluation of an MAA considerably beyond 210 days.

Where the CHMP gives a positive opinion, the EMA provides the opinion together with supporting documentation to the European Commission, who make the final decision to grant a MA, which is issued within 67 days of receipt of the EMA’s recommendations.

Accelerated assessment may be granted by the CHMP in exceptional cases, when a medicinal product is of major interest from the point of view of public health and, in particular, from the viewpoint of therapeutic innovation.

Accelerated assessment of an MAA might be performed by the CHMP in no more than 150 days (excluding clock stops) but it is possible that the CHMP may revert to the standard time limit for the centralized procedure if it determines that the application is no longer appropriate to conduct an accelerated assessment.

Innovative products that target an unmet medical need (there is no satisfactory method of diagnosis, prevention or treatment in the EU or, if there is, the new medicine will bring a major therapeutic advantage) may be eligible for a number of expedited development and review programs, such as the PRIME scheme, which provides incentives similar to the breakthrough therapy designation in the United States.

PRIME is a voluntary scheme aimed at enhancing the EMA’s support for the development of medicines that target unmet medical needs.

It is based on increased interaction and early dialogue with companies developing promising medicines, to optimize their product development plans and speed up their evaluation to help them reach patients earlier.

Product developers that benefit from PRIME designation can expect to be eligible for accelerated assessment but this is not guaranteed.

The benefits of a PRIME designation include the appointment of a CHMP rapporteur before submission of an MAA, early dialogue and scientific advice at key development milestones, and the potential to qualify products for accelerated review earlier in the application process.

National Authorisation Procedures

There are also two other possible routes to authorize medicinal products in several Member States.

National MAs are issued by the national competent authorities of the EU Member States and only cover their respective territory.

They are available for products that fall outside the scope of the centralized procedure:

● Decentralized procedure.

If the product has not received a national MA in any Member State at the time of application, an applicant may apply for simultaneous MAs in more than one EU Member State.

Under the decentralized procedure an identical dossier is submitted to the national competent authority of each of the Member States in which a MA is sought, one of which is selected by the applicant as the Reference Member State.

● Mutual recognition procedure.

Under the mutual recognition procedure, a medicine that has already been authorized in one EU Member State, in accordance with the national procedures of that Member State, can be recognized in another Member State.

MAs have an initial duration of five years.

After these five years, the authorization may be renewed for an unlimited period on the basis of a reevaluation of the risk-benefit balance.

Similar to the United States, there is a process for authorization of generic/biosimilar versions of innovator medicinal products authorized in the EU.

Abridged applications for the authorization of generic/biosimilar versions of medicinal products authorized via the EU centralized procedure can be submitted to the EMA through the centralized procedure referencing the innovator’s data.

Data and Market Exclusivity

In the EU, innovative medicinal products approved on the basis of a complete and independent data package qualify for eight years of data exclusivity upon grant of a MA and an additional two years of market exclusivity.

Data exclusivity prevents generic and biosimilar applicants from referencing the innovator’s preclinical and clinical trial data contained in the dossier of the reference product when applying for a MA for a period of eight years from the date on which the reference product was first authorized in the EU.

During the additional two-year period of market exclusivity, a generic or biosimilar MAA can be submitted and authorized, and the innovator’s data may be referenced, but no generic or biosimilar medicinal product can be marketed until the expiration of the market exclusivity period.

The overall 10 year period will be extended to a maximum of 11 years if, during the first eight years of those 10 years, the MA holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to authorization, is held to bring a significant clinical benefit in comparison with existing therapies.

There is no guarantee that a product will be considered by the EMA to be an innovative medicinal product, and products may not qualify for data exclusivity.

Even if a product is considered to be an innovative medicinal product so that the innovator gains the prescribed period of data exclusivity, another company may market another version of the product if such company obtained MA based on an MAA with a complete and independent data package of pharmaceutical tests, preclinical tests and clinical trials.

Orphan Medicinal Products

The criteria for designating an “orphan medicinal product” in the EU are similar in principle to those in the United States.

A medicinal product may be designated as orphan if (1) it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating conditions;

(2) either (a) such condition affects no more than 5 in 10,000 persons in the EU when the application is made, or (b) it is unlikely that the marketing of the product, without the benefits derived from orphan status, would generate sufficient return in the EU to justify the necessary investment in its development;

and (3) there exists no satisfactory method of diagnosis, prevention or treatment of such condition authorized for marketing in the EU or, if such a method exists, the product in question would be of significant benefit compared to products available for that condition.

In the EU, orphan designation entitles a party to financial incentives such as reduction of fees or fee waivers, regulatory assistance and the possibility to apply for a centralized MA.

The application for orphan designation must be submitted before the application for an MA.

Orphan designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

The grant of an MA for an orphan medicinal product leads to ten years of market exclusivity.

During the ten-year market exclusivity period, the EMA cannot accept an MAA, or grant an MA, or accept an application to extend an MA, for the same therapeutic indication, in respect of a “similar medicinal product”.

A “similar medicinal product” is defined as a medicinal product containing a similar active substance or substances as contained in an authorized orphan medicinal product, and which is intended for the same therapeutic indication.

An orphan medicinal product can also obtain an additional two years of market exclusivity in the EU for pediatric studies.

No extension to any supplementary protection certificate can be granted on the basis of pediatric studies for orphan indications.

The 10-year market exclusivity may be reduced to six years if, at the end of the fifth year, it is established that the orphan designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity.

At any time, a MA may be granted to a similar medicinal product for the same

therapeutic indication if:

(i) a second applicant can establish that its product, although similar to the authorized product, is safer, more effective or otherwise clinically superior;

(ii) the MA holder for the authorized product consents to a second orphan medicinal product application;

or (iii) the MA holder for the

authorized product cannot supply enough orphan medicinal product.

the EU, MAAs for new medicinal products have to include the results of trials conducted in the pediatric population, in compliance with

a pediatric investigation plan, or PIP, agreed with the EMA’s Pediatric Committee, or PDCO.

The PIP sets out the timing and measures

proposed to generate data to support a pediatric indication of the drug for which an MA is being sought.

The PDCO can grant a deferral

of the obligation to implement some or all of the measures of the PIP until there are sufficient data to demonstrate the efficacy and

safety of the product in adults.

Further, the obligation to provide pediatric clinical trial data can be waived by the PDCO when these

data are not needed or appropriate because the product is likely to be ineffective or unsafe in children, the disease or condition for

which the product is intended occurs only in adult populations, or when the product does not represent a significant therapeutic benefit

over existing treatments for pediatric patients.

Once the MA is obtained in all Member States and study results are included in the product

information, even when negative, the product is eligible for a six-months supplementary protection certificate extension (if any is in

effect at the time of approval) or, in the case of orphan pharmaceutical products, a two-year extension of the orphan market exclusivity

This pediatric reward is subject to specific conditions and is not automatically available when data in compliance with the

PIP are developed and submitted.

to comply with EU and Member State laws that apply to the conduct of clinical trials, manufacturing approval, marketing authorization

of medicinal products and marketing of such products, both before and after grant of the MA, manufacturing of pharmaceutical products,

statutory health insurance, bribery and anti-corruption or with other applicable regulatory requirements may result in administrative,

civil or criminal penalties.

These penalties could include delays or refusal to authorize the conduct of clinical trials, or to grant

MA, product withdrawals and recalls, product seizures, suspension, withdrawal or variation of the MA, total or partial suspension of

production, distribution, manufacturing or clinical trials, operating restrictions, injunctions, suspension of licenses, fines and criminal

of Combination Products

EU regulates medical devices and medicinal products separately, through different legislative instruments, and the applicable requirements

will vary depending on the type of drug-device combination product.

EU guidance has been published to help manufacturers select the right

regulatory framework.

In the case of drug-delivery products intended to administer a medicinal product where the device and the medicinal

product do not form a single integral product, the medicinal product is regulated in accordance with the aforementioned rules while the

device part is regulated as a medical device and will have to comply with all the requirements set by Regulation 2017/745, or the Medical

Devices Regulation (which became applicable on 26 May 2021 and repealed the EU Council Directive 93/42/EEC, or the Medical Devices Directive).

or (iii) the MA holder for the authorized product cannot supply enough orphan medicinal product.

Pediatric Development

In the EU, MAAs for new medicinal products have to include the results of trials conducted in the pediatric population, in compliance with a pediatric investigation plan, or PIP, agreed with the EMA’s Pediatric Committee, or PDCO.

The PIP sets out the timing and measures proposed to generate data to support a pediatric indication of the product for which an MA is being sought.

The PDCO can grant a deferral of the obligation to implement some or all of the measures of the PIP until there are sufficient data to demonstrate the efficacy and safety of the product in adults.

Further, the obligation to provide pediatric clinical trial data can be waived by the PDCO when these data are not needed or appropriate because the product is likely to be ineffective or unsafe in children, the disease or condition for which the product is intended occurs only in adult populations, or when the product does not represent a significant therapeutic benefit over existing treatments for pediatric patients.

Once the MA is obtained in all Member States and study results are included in the product information, even when negative, the product is eligible for a six-months supplementary protection certificate, or SPC extension (provided an application for such extension is made at the same time as filing the SPC application for the product, or at any point up to two years before the SPC expires) or, in the case of orphan medicinal products, a two-year extension of the orphan market exclusivity is granted.

This pediatric reward is subject to specific conditions and is not automatically available when data in compliance with the PIP are developed and submitted.

Failure to comply with EU and Member State laws that apply to the conduct of clinical trials, manufacturing approval, marketing of such products, both before and after grant of the MA, manufacturing of pharmaceutical products, statutory health insurance, bribery and anti-corruption or with other applicable regulatory requirements may result in administrative, civil or criminal penalties.

These penalties could include delays or refusal to authorize the conduct of clinical trials, or to grant a MA, product withdrawals and recalls, product seizures, suspension, withdrawal or variation of the MA, total or partial suspension of production, distribution, manufacturing or clinical trials, operating restrictions, injunctions, suspension of licenses, fines and criminal penalties.

Regulation of Combination Products

The EU regulates medical devices and medicinal products separately, through different legislative instruments, and the applicable requirements will vary depending on the type of drug-device combination product.

EU guidance has been published to help manufacturers select the right regulatory framework.

In the case of drug-delivery products intended to administer a medicinal product where the device and the medicinal product do not form a single integral product, the medicinal product is regulated in accordance with the aforementioned rules while the device part is regulated as a medical device and will have to comply with all the requirements set by Regulation 2017/745, or the Medical Devices Regulation (which became applicable on May 26, 2021 and repealed the EU Council Directive 93/42/EEC, or the Medical Devices Directive).

Where the medical device and medicinal product form a single integrated product (e.g.

pre-filled inhalers), if the principal intended

action is achieved by the medicine, the product is considered a medicinal product that includes a medical device and the entire product

is regulated under the EU pharmaceutical legislation.

However, the marketing authorization application for the product should include

a CE certificate for the device in accordance with the Medical Devices Regulation or, if not CE marked but would need to be certified

if marketed separately, the applicant must include an opinion from a notified body on conformity of device (except for Class I devices).

pre-filled inhalers), if the principal intended action is achieved by the medicine, the product is considered a medicinal product that includes a medical device and the entire product is regulated under the EU pharmaceutical legislation.

However, the MAA for the product should include a CE certificate for the device in accordance with the Medical Devices Regulation or, if not CE marked but would need to be certified if marketed separately, the applicant must include an opinion from a notified body on the conformity of device (except for Class I non-sterile, non-measuring devices).

This is a requirement under the new Medical Devices Regulation.

characteristics of non-integral devices used for the administration of medicinal products may impact the quality, safety and efficacy

profile of the medicinal products.

To the extent that administration devices are co-packaged with the medicinal product or, in exceptional

cases, where the use of a specific type of administration device is specifically provided for in the product information of the medicinal

product, additional information may need to be provided in the MAA for the medicinal product on the characteristics of the medical device(s)

that may impact on the quality, safety and/or efficacy of the medicinal product.

The requirements regarding quality aspects for integral

drug-device combination products, including devices that are co-packaged with medicinal products, are outlined in an EMA guideline which

came into effect on January 1, 2022.

EU requires that all medical devices placed on the market in the EU must meet the relevant general safety and performance requirements

laid down in Annex I of the Medical Devices Regulation.

The most fundamental requirement is that a medical device must be designed and

manufactured in such a way that it will not compromise the clinical condition or safety of patients, or the safety and health of users

In addition, the device must achieve the performances intended by the manufacturer and be designed, manufactured, and packaged

in a suitable manner.

To demonstrate compliance with the general safety and performance requirements laid down in Annex I to the Medical

Devices Regulation, medical device manufacturers must undergo a conformity assessment procedure, which varies according to the type of

medical device and its (risk) classification.

Conformity assessment procedures require an assessment of available clinical evidence,

literature data for the product, and post-market experience in respect of similar products already marketed.

Except for low-risk medical

devices (Class I non-sterile, non-measuring devices), where the manufacturer can self-declare the conformity of its products with the

general safety and performance requirements (except for any parts which relate to sterility or metrology), a conformity assessment procedure

requires the intervention of a Notified Body.

Notified Bodies are independent organizations designated by EU countries to assess the

conformity of devices before being placed on the market.

If satisfied that the relevant product conforms to the relevant general safety

and performance requirements, the Notified Body issues a certificate of conformity, which the manufacturer uses as a basis for its own

declaration of conformity.

The manufacturer may then apply the CE Mark to the device, which allows the device to be placed on the market

throughout the EU.

a general rule, demonstration of conformity of medical devices and their manufacturers with the general safety and performance requirements

must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal

conditions of use.

Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions

of use, that the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits

of its intended performance, and that any claims made about the performance and safety of the device are supported by suitable evidence.

aforementioned EU rules are generally applicable in the EEA.

and the Regulatory Framework in the United Kingdom

June 23, 2016, the electorate in the United Kingdom, or UK, voted in favor of leaving the EU, and the UK formally left the EU (commonly

referred to as “ Brexit”) on January 31, 2020.

There was a transition period during which EU pharmaceutical laws continued

to apply to the UK, which expired on December 31, 2020.

However, the EU and the UK have concluded a trade and cooperation agreement,

or TCA, which was provisionally applicable since January 1, 2021 and has been formally applicable since May 1, 2021.

The TCA includes

specific provisions concerning pharmaceuticals, which include the mutual recognition of GMP, inspections of manufacturing facilities

for medicinal products and GMP documents issued, but does not foresee wholesale mutual recognition of UK and EU pharmaceutical or medical

devices regulations.

At present, Great Britain has implemented EU legislation on the marketing, promotion and sale of medicinal products

through the Human Medicines Regulations 2012 (as amended) (under the Northern Ireland Protocol, the EU regulatory framework will continue

to apply in Northern Ireland).

The medicinal products regulatory regime in Great Britain therefore currently aligns with EU regulations,

however it is possible that these regimes will diverge in future now that Great Britain’s regulatory system is independent from

the EU and the TCA does not provide for mutual recognition of UK and EU pharmaceutical legislation.

The new Medical Devices Regulation

is not applicable in Great Britain following Brexit and the current legislation is based on the previous Medical Devices Directive.

that the UK (which comprises Great Britain and Northern Ireland) has left the EU, Great Britain will no longer be covered by centralized

MAs (under the Northern Ireland Protocol, centralized MA will continue to be recognized in Northern Ireland).

All medicinal products

with a current centralized MA were automatically converted to Great Britain MAs on January 1, 2021.

For a period of two years from January

1, 2021, the Medicines and Healthcare products Regulatory Agency, or MHRA, the UK medicines regulator, may rely on a decision taken by

the European Commission on the approval of a new MA in the centralized procedure, in order to more quickly grant a new Great Britain

The characteristics of non-integral devices used for the administration of medicinal products may impact the quality, safety and efficacy profile of the medicinal products.

To the extent that administration devices are co-packaged with the medicinal product or, in exceptional cases, where the use of a specific type of administration device is specifically provided for in the product information of the medicinal product, additional information may need to be provided in the MAA for the medicinal product on the characteristics of the medical device(s) that may impact on the quality, safety and/or efficacy of the medicinal product.

The requirements regarding quality aspects for integral drug-device combination products,

including devices that are co-packaged with medicinal products, are outlined in an EMA guideline which came into effect on January 1, 2022.

The EU requires that all medical devices placed on the market in the EU must meet the relevant general safety and performance requirements laid down in Annex I of the Medical Devices Regulation.

The most fundamental requirement is that a medical device must be designed and manufactured in such a way that it will not compromise the clinical condition or safety of patients, or the safety and health of users and others.

In addition, the device must achieve the performances intended by the manufacturer and be designed, manufactured, and packaged in a suitable manner.

To demonstrate compliance with the general safety and performance requirements laid down in Annex I to the Medical Devices Regulation, medical device manufacturers must undergo a conformity assessment procedure, which varies according to the type of medical device and its (risk) classification.

Conformity assessment procedures require an assessment of available clinical evidence, literature data for the product, and post-market experience in respect of similar products already marketed.

Except for low-risk medical devices (Class I non-sterile, non-measuring devices), where the manufacturer can self-declare the conformity of its products with the general safety and performance requirements (except for any parts which relate to sterility or metrology), a conformity assessment procedure requires the intervention of a notified body.

Notified bodies are independent organizations designated by EU countries to assess the conformity of devices before being placed on the market.

If satisfied that the relevant product conforms to the relevant general safety and performance requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity.

The manufacturer may then apply the CE mark to the device, which allows the device to be placed on the market throughout the EU.

As a general rule, demonstration of conformity of medical devices and their manufacturers with the general safety and performance requirements must be based, among other things, on the evaluation of clinical data supporting the safety and performance of the products during normal conditions of use.

Specifically, a manufacturer must demonstrate that the device achieves its intended performance during normal conditions of use, that the known and foreseeable risks, and any adverse events, are minimized and acceptable when weighed against the benefits of its intended performance, and that any claims made about the performance and safety of the device are supported by suitable evidence.

The aforementioned EU rules are generally applicable in the EEA.

Brexit and the Regulatory Framework in the United Kingdom

The United Kingdom, or UK formally left the EU (commonly referred to as “ Brexit”) on January 31, 2020, and the EU and the UK have concluded a trade and cooperation agreement, or TCA, which was provisionally applicable since January 1, 2021 and has been formally applicable since May 1, 2021.

The TCA includes specific provisions concerning pharmaceuticals, which include the mutual recognition of GMP, inspections of manufacturing facilities for medicinal products and GMP documents issued, but does not provide for wholesale mutual recognition of UK and EU pharmaceutical or medical devices regulations.

At present, Great Britain has implemented EU legislation on the marketing, promotion and sale of medicinal products through the Human Medicines Regulations 2012 (as amended) (under the Northern Ireland Protocol, the EU regulatory framework continues to apply in Northern Ireland).

The medicinal products regulatory regime in Great Britain therefore largely aligns with EU regulations, however it is possible that these regimes will diverge more significantly in future now that Great Britain’s regulatory system is independent from the EU and the TCA does not provide for mutual recognition of UK and EU pharmaceutical legislation.

The new Medical Devices Regulation is not applicable in Great Britain following Brexit and the current legislation is based on the previous Medical Devices Directive.

Since Brexit, Great Britain is no longer covered by centralized MAs (under the Northern Ireland Protocol, centralized MAs continue to be recognized in Northern Ireland).

All medicinal products with a centralized MA were automatically converted to Great Britain MAs on January 1, 2021.

For a period of three years from January 1, 2021, the Medicines and Healthcare products Regulatory Agency, or MHRA, the UK medicines regulator, may rely on a decision taken by the European Commission on the approval of a new MA in the centralized procedure, in order to more quickly grant a new Great Britain MA.

A separate application will, however, still be required.

International Markets—Drug Approval Process

some international markets ( e.g.

, China or Japan), although data generated in United States or EU trials may be submitted in support

of a MAA, additional clinical trials conducted in the host territory, or studying people of the ethnicity of the host territory, may

be required prior to the filing or approval of MA within the country.

and Reimbursement

the United States and internationally, sales of products that we market in the future, and our ability to generate revenues on such sales,

are dependent, in significant part, on the availability and level of reimbursement from third-party payors such as state and federal

governments, managed care providers and private insurance plans.

Substantial uncertainty exists as to the reimbursement status of newly

approved healthcare products by third-party payors.

the United States no uniform policy of coverage and reimbursement for drug products exists.

Accordingly, decisions regarding the extent

of coverage and amount of reimbursement to be provided for any of our products will be made on a payor by payor basis.

Private third-party

payors tend to follow Medicare coverage policies and payment limitations in setting their own reimbursement rate to a substantial degree,

but also have their own methods and approval process apart from Medicare determinations.

As a result, coverage determination process

is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our product

candidates to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained.

Factors payors consider

in determining reimbursement are based on whether the product is:

covered benefit under its health plan;

effective and medically necessary;

● appropriate

for the specific patient;

On January 24, 2023, the MHRA announced that a new international recognition framework will be put in place from January 1, 2024, which will have regard to decisions on the approval of MAs made by the European Medicines Agency and certain other regulators when determining an application for a new Great Britain MA.

Other International Markets—Drug Approval Process

In some international markets ( e.g.

, China or Japan), although data generated in United States or EU trials may be submitted in support of a MAA, additional clinical trials conducted in the host territory, or studying people of the ethnicity of the host territory, may be required prior to the filing or approval of MA within the country.

Pricing and Reimbursement

In the United States and internationally, sales of products that we market in the future, and our ability to generate revenues on such sales, are dependent, in significant part, on the availability and level of reimbursement from third-party payors such as state and federal governments, managed care providers and private insurance plans.

Substantial uncertainty exists as to the reimbursement status of newly approved healthcare products by third-party payors.

In the United States no uniform policy of coverage and reimbursement for drug products exists.

Accordingly, decisions regarding the extent of coverage and amount of reimbursement to be provided for any of our products will be made on a payor by payor basis.

Private third-party payors tend to follow Medicare coverage policies and payment limitations in setting their own reimbursement rate to a substantial degree, but also have their own methods and approval process apart from Medicare determinations.

As a result, coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our product candidates to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained.

Factors payors consider in determining reimbursement are based on whether the product is:

● a covered benefit under its health plan;

● safe, effective and medically necessary;

● appropriate for the specific patient;

● cost-effective;

experimental nor investigational.

Increasingly,

third party payors are implementing cost-cutting and reimbursement initiatives and likely will continue to do so in the future.

include establishing formularies that govern the drugs and biologics that will be offered and also the out-of-pocket obligations of member

patients for such products.

In addition, net prices for drugs may be reduced by mandatory discounts or rebates required by government

healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs from countries where

they may be sold at lower prices than in the United States.

It is possible that future legislation in the United States and other jurisdictions

could be enacted which could potentially impact the reimbursement rates for the products we are developing and may develop in the future

and also could further impact the levels of discounts and rebates paid to federal and state government entities.

Any legislation that

impacts these areas could impact, in a significant way, our ability to generate revenues from sales of products that, if successfully

developed, we bring to market.

addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed.

The requirements

governing drug pricing vary widely from country to country.

In the EU, governments influence the price of medicinal products through

their pricing and reimbursement rules and control of national healthcare systems that fund a large part of the cost of those products

to consumers.

Member States are free to restrict the range of medicinal products for which their national health insurance systems provide

reimbursement and to control the prices of medicinal products for human use.

Some jurisdictions operate positive and negative list systems

under which products may only be marketed once a reimbursement price has been agreed to by the government.

Member States may approve

a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the

company placing the medicinal product on the market, including volume-based arrangements, caps and reference pricing mechanisms.

reimbursement or pricing approval, some of the Member States may require the completion of clinical trials that compare the cost effectiveness

of a particular product candidate to currently available therapies that are considered the local standard of care.

Other Member States

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

The downward pressure on healthcare costs

in general, particularly prescription medicines, has become very intense.

It is increasingly common in many EU Member States for MA holders

to be required to demonstrate the pharmaco-economic superiority of their products as compared to products already subject to pricing

and reimbursement in specific countries.

In order for drugs to be evaluated positively under such criteria, pharmaceutical companies

may need to re-examine, and consider altering, a number of traditional functions relating to the selection, study, and management of

drugs, whether currently marketed, under development, or being evaluated as candidates for research and/or development.

and Marketing

promotion and other activities following product approval are subject to regulation by numerous regulatory authorities in addition to

the FDA, including, in the United States, the Centers for Medicare & Medicaid Services, other divisions of the Department of Health

and Human Services, the U.S.

● neither experimental nor investigational.

Increasingly, third party payors are implementing cost-cutting and reimbursement initiatives and likely will continue to do so in the future.

These include establishing formularies that govern the drugs and biologics that will be offered and also the out-of-pocket obligations of member patients for such products.

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

It is possible that future legislation in the United States and other jurisdictions could be enacted which could potentially impact the reimbursement rates for the products we are developing and may develop in the future and also could further impact the levels of discounts and rebates paid to federal and state government entities.

Any legislation that impacts these areas could impact, in a significant way, our ability to generate revenues from sales of products that, if successfully developed, we bring to market.

In addition, in some foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed.

The requirements governing drug pricing vary widely from country to country.

In the EU, governments influence the price of medicinal products through their pricing and reimbursement rules and control of national healthcare systems that fund a large part of the cost of those products to consumers.

Member States are free to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use.

Some jurisdictions operate positive and negative list systems under which products may only be marketed once a reimbursement price has been agreed to by the government.

Member States may approve a specific price for the medicinal product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the medicinal product on the market, including volume-based arrangements, caps and reference pricing mechanisms.

To obtain reimbursement or pricing approval, some of the Member States may require the completion

of clinical trials that compare the cost effectiveness of a particular product candidate to currently available therapies that are considered the local standard of care.

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

The downward pressure on healthcare costs in general, particularly prescription medicines, has become very intense.

It is increasingly common in many EU Member States for MA holders to be required to demonstrate the pharmaco-economic superiority of their products as compared to products already subject to pricing and reimbursement in specific countries.

In order for drugs to be evaluated positively under such criteria, pharmaceutical companies may need to re-examine, and consider altering, a number of traditional functions relating to the selection, study, and management of drugs, whether currently marketed, under development, or being evaluated as candidates for research and/or development.

Sales and Marketing

Sales, promotion and other activities following product approval are subject to regulation by numerous regulatory authorities in addition to the FDA, including, in the United States, the Centers for Medicare & Medicaid Services, other divisions of the Department of Health and Human Services, the U.S.

Department of Justice, and similar foreign, state, and local government authorities.

described above, the FDA regulates all advertising and promotion activities for products under its jurisdiction both prior to and after

As described above, the FDA regulates all advertising and promotion activities for products under its jurisdiction both prior to and after approval.

A company can make only those claims relating to safety and efficacy that are approved by the FDA in labeling.

Physicians may

prescribe legally available drugs for uses that are not described in the drug’s labeling and that differ from those tested by us

and approved by the FDA.

Such off-label uses are common across medical specialties, and often reflect a physician’s belief that

the off-label use is the best treatment for the patients.

The FDA does not regulate the behavior of physicians in their choice of treatments,

but FDA regulations do impose stringent restrictions on manufacturers’ communications regarding off-label uses.

Failure to comply

with applicable FDA requirements may subject a company to adverse publicity, enforcement action by the FDA, corrective advertising, consent

decrees and the full range of civil and criminal penalties available to the FDA.

Laws and Regulations

Pharmaceutical

companies are also subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states

and foreign jurisdictions in which they conduct their business that may constrain the financial arrangements and relationships through

which we research, as well as sell, market and distribute any products for which we obtain marketing authorization.

Such laws include,

without limitation, state and federal anti-kickback, fraud and abuse, false claims, and transparency laws and regulations related to

drug pricing and payments and other transfers of value made to physicians and other healthcare providers.

If our operations are found

to be in violation of any of such laws or any other governmental regulations that apply, we may be subject to penalties, including, without

limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, the curtailment or restructuring of operations,

integrity oversight and reporting obligations, exclusion from participation in federal and state healthcare programs and responsible

individuals may be subject to imprisonment.

rigid restrictions are imposed on the promotion and marketing of medicinal products in the EU and other countries.

Laws (including those

governing promotion, marketing and anti-kickback provisions), industry regulations and professional codes of conduct often are strictly

Even in those countries where we are not directly responsible for the promotion and marketing of our products, inappropriate

activity by our international distribution partners can have adverse implications for us.

Reform and Legislation

whether domestic or foreign, or governmental or private, are developing increasingly sophisticated methods of controlling healthcare

costs and those methods are not always specifically adapted for new technologies such as gene therapy and therapies addressing rare diseases

such as those we are developing.

In both the United States and certain foreign jurisdictions, there have been a number of legislative

and regulatory changes to the health care system that could impact our ability to sell our products profitably.

In particular, in 2010,

the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively,

the ACA, was enacted, which, among other things, subjected biologic products to potential competition by lower-cost biosimilars;

a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled,

infused, instilled, implanted or injected;

increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug

Rebate Program;

extended the Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled in Medicaid managed

care organizations;

Physicians may prescribe legally available drugs for uses that are not described in the drug’s labeling and that differ from those tested by us and approved by the FDA.

Such off-label uses are common across medical specialties, and often reflect a physician’s belief that the off-label use is the best treatment for the patients.

The FDA does not regulate the behavior of physicians in their choice of treatments, but FDA regulations do impose stringent restrictions on manufacturers’ communications regarding off-label uses.

Failure to comply with applicable FDA requirements may subject a company to adverse publicity, enforcement action by the FDA, corrective advertising, consent decrees and the full range of civil and criminal penalties available to the FDA.

Healthcare Laws and Regulations

Pharmaceutical companies are also subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which they conduct their business that may constrain the financial arrangements and relationships through which we research, as well as sell, market and distribute any products for which we obtain marketing authorization.

Such laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, and transparency laws and regulations related to drug pricing and payments and other transfers of value made to physicians and other healthcare providers.

If our operations are found to be in violation of any of such laws or any other governmental regulations that apply, we may be subject to penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, the curtailment or restructuring of operations, integrity oversight and reporting obligations, exclusion from participation in federal and state healthcare programs and responsible individuals may be subject to imprisonment.

Such laws include, but are not limited to:

● the United States federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or providing any remuneration (including any kickback, bribe, or certain rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under any United States federal healthcare program, such as Medicare and Medicaid.

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

Violations are subject to civil and criminal fines and penalties for each violation, plus up to three times the remuneration involved, imprisonment, and exclusion from government healthcare programs.

In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act or federal civil money penalties;

● the United States federal civil monetary penalty and civil and criminal false claims laws, including the civil federal False Claims Act, which can be enforced through civil whistleblower or qui tam actions, which prohibit,

among other things, individuals or entities from knowingly presenting, or causing to be presented, to the United States federal government, claims for payment or approval that are false or fraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the United States federal government.

Manufacturers can be held liable under the federal False Claims Act even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims.

Pharmaceutical manufacturers can cause false claims to be presented to the United States federal government by engaging in impermissible marketing practices, such as the off-label promotion of a product for an indication for which it has not received FDA approval.

In addition, the government may assert that a claim including items and services resulting from a violation of the United States federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act.

The federal False Claims Act also permits a private individual acting as a “whistleblower” to bring actions on behalf of the federal government alleging violations of the federal False Claims Act and to share in any monetary recovery;

● the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes that prohibit a person from knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false, fictitious, or fraudulent statements or representations in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters;

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

● the FDCA, which prohibits, among other things, the adulteration or misbranding of drugs, biologics and medical devices;

● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, including the Final Omnibus Rule published in January 2013, which impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates, independent contractors or agents of covered entities, that perform services for them that involve the creation, maintenance, receipt, use, or disclosure of, individually identifiable health information relating to the privacy, security and transmission of individually identifiable health information.

HITECH also created 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.

In addition, there may be additional federal, state and non-U.S.

laws which govern the privacy and security of health and other personal information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts;

● the United States Physician Payments Sunshine Act and its implementing regulations, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to report annually to the government information related to certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain other health care professionals (physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists & anesthesiologist assistants, and certified nurse-midwives), and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members;

● federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers;

● federal government price reporting laws, which require us to calculate and report complex pricing metrics in an accurate and timely manner to government programs;

● analogous United States state laws, including:

state anti-kickback and false claims laws, which may apply to our business practices, including but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers;

state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the United States federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources;

state laws that require drug manufacturers to file reports relating to pricing and marketing information, which requires tracking gifts and other remuneration and items of value provided to healthcare professionals and entities;

and state and local laws requiring the registration of pharmaceutical sales representatives;

● the United States Foreign Corrupt Practices Act of 1977, as amended, which prohibits, among other things, United States companies and their employees and agents from authorizing, promising, offering, or providing, directly or indirectly, corrupt or improper payments or anything else of value to foreign government officials, employees of public international organizations and foreign government owned or affiliated entities, candidates for foreign political office, and foreign political parties or officials thereof;

● similar healthcare laws in the European Union and other jurisdictions, including reporting requirements detailing interactions with and payments to healthcare providers and laws governing privacy and security of health information, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

Similar rigid restrictions are imposed on the promotion and marketing of medicinal products in the EU and other countries.

Laws (including those governing promotion, marketing and anti-kickback provisions), industry regulations and professional codes of conduct often are strictly enforced.

Even in those countries where we are not directly responsible for the promotion and marketing of our products, inappropriate activity by our international distribution partners can have adverse implications for us.

Healthcare Reform and Legislation

Payors, whether domestic or foreign, or governmental or private, are developing increasingly sophisticated methods of controlling healthcare costs and those methods are not always specifically adapted for new technologies such as gene therapy and therapies addressing rare diseases such as those we are developing.

In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that could impact our ability to sell our products profitably.

In particular, in 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the ACA, was enacted, which, among other things, subjected biologic products to potential competition by lower-cost biosimilars;

increased the minimum Medicaid rebates owed by most manufacturers under the Medicaid Drug Rebate Program;

extended the Medicaid Drug Rebate program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations;

subjected manufacturers to new annual fees and taxes for certain branded prescription drugs;

created a new Medicare

Part D coverage gap discount program, in which manufacturers must agree to offer 50% (increased to 70% pursuant to the Bipartisan Budget

Act of 2018, effective as of January 1, 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries

during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;

provided incentives to programs that increase the federal government’s comparative effectiveness research.

its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain aspects of the ACA.

On December 20, 2019, former President Trump signed into law the Further Consolidated Appropriations Act (H.R.

1865), which repealed

the Cadillac tax, the health insurance provider tax, and the medical device excise tax.

On June 17, 2021, the U.S.

Supreme Court dismissed

the most recent judicial challenge to the ACA brought by several states without specifically ruling on the constitutionality of the ACA.

Prior to the Supreme Court’s decision, President Biden issued an executive order to initiate a special enrollment period from February

15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace.

The executive order

also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare,

including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies

that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA.

It is unclear how other

healthcare reform measures of the Biden administration or other efforts, if any, to challenge, repeal or replace the ACA will impact

our business.

legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted.

In August 2011, the

Budget Control Act of 2011, among other things, included aggregate reductions of Medicare payments to providers up to 2% per fiscal year.

These reductions went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect

through 2030, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic.

the temporary suspension, a 1% payment reduction will occur beginning April 1, 2022 through June 30, 2022, and the 2% payment reduction

will resume on July 1, 2022.

In addition, the American Taxpayer Relief Act of 2012 further reduced Medicare payments to several providers,

including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government

to recover overpayments to providers from three to five years.

Additionally, in May 2019, CMS issued a final rule to allow Medicare Advantage

Plans the option of using step therapy for Part B drugs beginning January 1, 2020.

However, it is unclear whether the Biden administration

will challenge, reverse, revoke or otherwise modify these executive and administrative actions after January 20, 2021.

has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices.

Specifically,

there have been several recent United States Congressional inquiries and proposed federal and state legislation designed to, among other

things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between

pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.

At a federal level, President

Biden signed an Executive Order on July 9, 2021 (i) directing the FDA to, among other things, work with states and tribes to safely import

prescription drugs from Canada, continue to clarify and improve the approval framework for generic drugs and identify and address any

efforts to impede generic drug competition;

and (ii) affirming the administration’s policy to support the enactment of a public

health insurance option.

Among other things, the Executive Order also directs HHS to provide a report on actions to combat excessive

pricing of prescription drugs, enhance the domestic drug supply chain, reduce the price that the Federal government pays for drugs, and

address price gouging in the industry;

and directs the FDA to work with states and Indian Tribes that propose to develop section 804

Importation Programs in accordance with the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, and the FDA’s

implementing regulations.

FDA released such implementing regulations on September 24, 2020, which went into effect on November 30, 2020,

providing guidance for states to build and submit importation plans for drugs from Canada.

On September 25, 2020, CMS stated drugs imported

by states under this rule will not be eligible for federal rebates under Section 1927 of the Social Security Act and manufacturers would

not report these drugs for “best price” or Average Manufacturer Price purposes.

Since these drugs are not considered covered

outpatient drugs, CMS further stated it will not publish a National Average Drug Acquisition Cost for these drugs.

Further, on November

20, 2020 CMS issued an Interim Final Rule implementing the Most Favored Nation, or MFN, Model under which Medicare Part B reimbursement

rates would have been calculated for certain drugs and biologicals based on the lowest price drug manufacturers receive in Organization

for Economic Cooperation and Development countries with a similar gross domestic product per capita.

However, on December 29, 2021 CMS

rescinded the Most Favored Nations rule..

Additionally, on November 30, 2020, HHS published a regulation removing safe harbor protection

for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers,

unless the price reduction is required by law.

The rule also creates a new safe harbor for price reductions reflected at the point-of-sale,

as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers.

Pursuant to court order,

the removal and addition of the aforementioned safe harbors have been delayed until January 1, 2023.

Further, implementation of this

change and new safe harbors for point-of-sale reductions in price for prescription pharmaceutical products and pharmacy benefit manager

service fees are currently under review by the Biden administration and may be amended or repealed.

Although a number of these and other

proposed measures may require authorization through additional legislation to become effective, and the Biden administration may reverse

or otherwise change these measures, both the Biden administration and Congress have indicated that it will continue to seek new legislative

measures to control drug costs.

on May 30, 2018, the Right to Try Act, was signed into law.

The law, among other things, provides a federal framework for certain patients

to access certain investigational new drug products that have completed a Phase 1 clinical trial and that are undergoing investigation

for FDA approval.

Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without

obtaining FDA permission under the FDA expanded access program.

There is no obligation for a pharmaceutical manufacturer to make its

drug products available to eligible patients as a result of the Right to Try Act.

the state level, individual states are increasingly active in passing legislation and implementing regulations designed to control pharmaceutical

and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access

and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and

bulk purchasing.

In addition, regional health care authorities and individual hospitals are increasingly using bidding procedures to

determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs.

created a Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;

and provided incentives to programs that increase the federal government’s comparative effectiveness research.

Other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted.

The Budget Control Act of 2011, among other things, included aggregate reductions of Medicare payments to providers up to 2% per fiscal year.

Subsequent legislation extended the 2% payment reduction which remains in effect through 2030.

In addition, the American Taxpayer Relief Act of 2012 further reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

Additionally, in May 2019, CMS issued a final rule to allow Medicare Advantage Plans the option of using step therapy for Part B drugs beginning January 1, 2020.

However, it is

unclear whether the Biden administration will challenge, reverse, revoke or otherwise modify these executive and administrative actions after January 20, 2021.

The Inflation Reduction Act of 2022, includes several provisions that may impact our business to varying degrees, including provisions that reduce the out-of-pocket cap for Medicare Part D beneficiaries to $2,000 starting in 2025;

impose new manufacturer financial liability on certain drugs under Medicare Part D, allow the U.S.

government to negotiate Medicare Part B and Part D price caps for certain high-cost drugs and biologics without generic or biosimilar competition, require companies to pay rebates to Medicare for certain drug prices that increase faster than inflation, and delay the rebate rule that would limit the fees that pharmacy benefit managers can charge.

Further, under the IRA, orphan drugs are exempted from the Medicare drug price negotiation program, but only if they have one rare disease designation and for which the only approved indication is for that disease or condition.

If a product receives multiple rare disease designations or has multiple approved indications, it may not qualify for the orphan drug exemption.

The effects of the IRA on our business and the healthcare industry in general is not yet known.

There has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices.

Specifically, there have been several recent United States Congressional inquiries and proposed federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.

President Biden has issued multiple executive orders that have sought to reduce prescription drug costs.

Although a number of these and other proposed measures may require authorization through additional legislation to become effective, and the Biden administration may reverse or otherwise change these measures, both the Biden administration and Congress have indicated that it will continue to seek new legislative measures to control drug costs.

Further, on May 30, 2018, the Right to Try Act, was signed into law.

The law, among other things, provides a federal framework for certain patients to access certain investigational new drug products that have completed a Phase 1 clinical trial and that are undergoing investigation for FDA approval.

Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program.

There is no obligation for a pharmaceutical manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act.

At the state level, individual states are increasingly active in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

In addition, regional health care authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs.

These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing.

Privacy and Security Laws

state, federal and foreign laws, including consumer protection laws and regulations, govern the collection, dissemination, use, access

to, confidentiality, and security of personal information, including health-related information.

In the United States, numerous federal

and state laws and regulations, including data breach notification laws, health information privacy and security laws, including HIPAA

and federal and state consumer protection laws and regulations (e.g., Section 5 of the Federal Trade Commission Act) that govern the

collection, use, disclosure, and protection of health-related and other personal information could apply to our operations or the operations

of our partners.

Data Privacy and Security Laws

Numerous state, federal and foreign laws, including consumer protection laws and regulations, govern the collection, dissemination, use, access to, confidentiality, and security of personal information, including health-related information.

In the United States, numerous federal and state laws and regulations, including data breach notification laws, health information privacy and security laws, including HIPAA and federal and state consumer protection laws and regulations (e.g., Section 5 of the Federal Trade Commission Act) that govern the collection, use, disclosure, and protection of health-related and other personal information could apply to our operations or the operations of our partners.

In addition, certain state and non-U.S.

laws, such as the CCPA, CPRA and GDPR, govern the privacy and security of personal

information, including health-related information in certain circumstances, some of which are more stringent than HIPAA and many of which

differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

Failure to comply

with these laws, where applicable, can result in the imposition of significant civil and/or criminal penalties and private litigation.

Privacy and security laws, regulations, and other obligations are constantly evolving, may conflict with each other to make compliance

efforts more challenging, and can result in investigations, proceedings, or actions that lead to significant penalties and restrictions

on data processing.

Laws and Regulatory Processes

will become subject to a variety of financial disclosure and securities trading regulations as a public company in the United States,

including laws relating to the oversight activities of the SEC and, following the listing of our capital stock on The Nasdaq Global Market,

we will be subject to the regulations of The Nasdaq Global Market.

In addition, the Financial Accounting Standards Board, or FASB, the

SEC and other bodies that have jurisdiction over the form and content of our accounts, our financial statements and other public disclosure

are constantly discussing and interpreting proposals and existing pronouncements designed to ensure that companies best display relevant

and transparent information relating to their respective businesses.

international operations are subject to compliance with the Foreign Corrupt Practices Act, or the FCPA, which prohibits corporations

and individuals from paying, offering to pay, or authorizing the payment of anything of value to any foreign government official, government

staff member, political party, or political candidate in an attempt to obtain or retain business or to otherwise influence a person working

in an official capacity.

We also may be implicated under the FCPA for activities by our partners, collaborators, CROs, vendors or other

present and future business has been and will continue to be subject to various other laws and regulations.

Various laws, regulations

and recommendations relating to safe working conditions, laboratory practices, the experimental use of animals, and the purchase, storage,

movement, import and export and use and disposal of hazardous or potentially hazardous substances used in connection with our research

work are or may be applicable to our activities.

Certain agreements entered into by us involving exclusive license rights or acquisitions

may be subject to national or supranational antitrust regulatory control, the effect of which cannot be predicted.

The extent of government

regulation, which might result from future legislation or administrative action, cannot accurately be predicted.

Capital Resources

of March 28, 2022, we had 16 full-time employees, including eleven in research and development and five in general

and administrative functions.

laws, such as the CCPA, as modified by the CPRA and GDPR, govern the privacy and security of personal information, including health-related information in certain circumstances, some of which are more stringent than HIPAA and many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

Failure to comply with these laws, where applicable, can result in the imposition of significant civil and/or criminal penalties and private litigation.

Privacy and security laws, regulations, and other obligations are constantly evolving, may conflict with each other to make compliance efforts more challenging, and can result in investigations, proceedings, or actions that lead to significant penalties and restrictions on data processing.

Other Laws and Regulatory Processes

We will become subject to a variety of financial disclosure and securities trading regulations as a public company in the United States, including laws relating to the oversight activities of the SEC and, following the listing of our capital stock on The Nasdaq Global Market, we will be subject to the regulations of The Nasdaq Global Market.

In addition, the Financial Accounting Standards Board, or FASB, the SEC and other bodies that have jurisdiction over the form and content of our accounts, our financial statements and other public disclosure are constantly discussing and interpreting proposals and existing pronouncements designed to ensure that companies best display relevant and transparent information relating to their respective businesses.

Our international operations are subject to compliance with the Foreign Corrupt Practices Act, or the FCPA, which prohibits corporations and individuals from paying, offering to pay, or authorizing the payment of anything of value to any foreign government official, government staff member, political party, or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an official capacity.

We also may be implicated under the FCPA for activities by our partners, collaborators, CROs, vendors or other agents.

Our present and future business has been and will continue to be subject to various other laws and regulations.

Various laws, regulations and recommendations relating to safe working conditions, laboratory practices, the experimental use of animals, and the purchase, storage, movement, import and export and use and disposal of hazardous or potentially hazardous substances used in connection with our research work are or may be applicable to our activities.

Certain agreements entered into by us involving exclusive license rights or acquisitions may be subject to national or supranational antitrust regulatory control, the effect of which cannot be predicted.

The extent of government regulation, which might result from future legislation or administrative action, cannot accurately be predicted.

Human Capital Resources

As of March 27, 2023, we had 43 full-time employees, including 35 in research and development and eight in general and administrative functions.

We also contract with a number of consultants to supplement the efforts and responsibilities of our employees.

None of our employees is subject to a collective bargaining agreement or represented by a labor or trade union.

human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing

and new employees, advisors and consultants.

The principal purposes of our equity and cash incentive plans are to attract, retain and

reward personnel through the granting of stock-based and cash-based compensation awards, in order to increase stockholder value and the

success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives.

We are committed to fostering a diverse workforce

and a culture of inclusion.

We pursue fair employment practices in every aspect of our business

and are dedicated to creating a productive work environment for all our employees.

Both at work and in the clinic, we are committed to

recruiting individuals that exemplify diversity in culture and life experience and are always striving to grow and improve.

an emerging company operating in a competitive industry, much of our success is rooted in investing in the development of each of our

It is our goal to empower all employees to take full advantage of their professional growth opportunities, to lead them to

long-term job satisfaction and organizational success.

Our people are our greatest competitive advantage and as we grow, we plan to continue

to add to our human capital initiatives.

were incorporated under the laws of the State of Delaware in July 2018.

Our principal corporate office is located at 930 Winter Street,

Suite M-500, Waltham, MA 02451, and our telephone number is (617) 443-2400.

None of our employees are subject to a collective bargaining agreement or represented by a labor or trade union.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees, advisors and consultants.

The principal purposes of our equity and cash incentive plans are to attract, retain and reward personnel through the granting of stock-based and cash-based compensation awards, in order to increase stockholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives.

We are committed to fostering a diverse workforce and a culture of inclusion.

We pursue fair employment practices in every aspect of our business and are dedicated to creating a productive work environment for all our employees.

Both at work and in the clinic, we are committed to recruiting individuals that exemplify diversity in culture and life experience and are always striving to grow and improve.

As an emerging company operating in a competitive industry, much of our success is rooted in investing in the development of each of our employees.

It is our goal to empower all employees to take full advantage of their professional growth opportunities, to lead them to long-term job satisfaction and organizational success.

Our people are our greatest competitive advantage and as we grow, we plan to continue to add to our human capital initiatives.

Corporate Information

We were incorporated under the laws of the State of Delaware in July 2018.

Our principal corporate office is located at 930 Winter Street, Suite M-500, Waltham, MA 02451, and our telephone number is (617) 443-2400.

Our website address is www.aerovatetx.com.

Our website and

the information contained on, or that can be accessed through, the website will not be deemed to be incorporated by reference in, and

are not considered part of, this Annual Report on Form 10-K.

own various U.S.

Our website and the information contained on, or that can be accessed through, the website will not be deemed to be incorporated by reference in, and are not considered part of, this Annual Report on Form 10-K.

We own various U.S.

federal trademark applications and unregistered trademarks, including our company name.

All other trademarks or trade

names referred to in this Annual Report on Form 10-K are the property of their respective owners.

July 2, 2021, we closed our initial public offering, or IPO, in which we issued and sold 9,984,463 shares of common stock, including

the exercise in full by the underwriters of their option to purchase up to 1,302,231 additional shares of common stock, at a public offering

price of $14.00 per share.

Including the option exercise, our aggregate net proceeds from the IPO were $126.9 million, net of underwriting

discounts, commissions and estimated offering costs.

are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012.

We will remain an emerging

growth company until the earlier of:

(i) the last day of the fiscal year (a) following the fifth anniversary of the completion of the

IPO, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated

filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th,

and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

for convenience, the trademarks and trade names in this Annual Report on Form 10-K are referred to without the symbols ® and ™,

but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under

applicable law, their rights thereto.

website address is https://www.aerovatetx.com.

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form

8-K, including exhibits, proxy and information statements and amendments to those reports filed or furnished pursuant to Sections 13(a),

14, and 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, are available through the “Investors”

portion of our website free of charge as soon as reasonably practicable after we electronically file such material with, or furnish it

Information on our website is not part of this Annual Report on Form 10-K or any of our other securities filings unless

specifically incorporated herein by reference.

In addition, our filings with the SEC may be accessed through the SEC’s Interactive

Data Electronic Applications system at www.sec.gov.

All statements made in any of our securities filings, including all forward-looking

statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake

any obligation to update any of those statements or documents unless we are required to do so by law.

code of conduct, corporate governance guidelines and the charters of our Audit Committee, Compensation Committee and Nominating and Corporate

Governance Committee are available through the “Investors” portion of our website.

All other trademarks or trade names referred to in this Annual Report on Form 10-K are the property of their respective owners.

On July 2, 2021, we closed our initial public offering, or IPO, in which we issued and sold 9,984,463 shares of common stock, including the exercise in full by the underwriters of their option to purchase up to 1,302,321 additional shares of common stock, at a public offering price of $14.00 per share.

Including the option exercise, our aggregate net proceeds from the IPO were $126.9 million, net of underwriting discounts, commissions and estimated offering costs.

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012.

We will remain an emerging growth company until the earlier of:

(i) the last day of the fiscal year (a) following the fifth anniversary of the completion of the IPO, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

Solely for convenience, the trademarks and trade names in this Annual Report on Form 10-K are referred to without the symbols ® and ™, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

Available Information

Our website address is https://www.aerovatetx.com.

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, including exhibits, proxy and information statements and amendments to those reports filed or furnished pursuant to Sections 13(a), 14, and 15(d) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, are available through the “Investors” portion of our website free of charge as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

Information on our website is not part of this Annual Report on Form 10-K or any of our other securities filings unless specifically incorporated herein by reference.

In addition, our filings with the SEC may be accessed through the SEC’s Interactive Data Electronic Applications system at www.sec.gov.

All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law.

From time to time, we may use our website, LinkedIn or our Twitter account (@AerovateTx) to distribute material information.

Our financial and other material information is routinely posted to and accessible on the Investors section of our website, available at www.aerovatetx.com.

Investors are encouraged to review the Investors section of our website because we may post material information on that site that is not otherwise disseminated by us.

Information that is contained in and can be accessed through our website or our Twitter or LinkedIn posts are not incorporated into, and does not form a part of, this Annual Report.

Our code of conduct, corporate governance guidelines and the charters of our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee are available through the “Investors” portion of our website.

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

What changed 10-K

Item 1. Business