What changed in this filing

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Item 1. Business

2024-03-25 compared with 2023-03-29 · 191 added, 156 removed, 863 unchanged (29% of the section changed)

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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.

In November 2023, we completed enrollment in the Phase 2b portion and enrolled the first patient in the Phase 3 portion of Inhaled iMatinib Pulmonary Arterial Hypertension Clinical Trial (IMPAHCT), our global Phase 2b/Phase 3 trial of AV-101 in adults with PAH.

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.

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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.

In November 2023, we announced completion of enrollment with 202 patients in the Phase 2b portion and enrollment of the first patient in the Phase 3 portion of IMPAHCT, our global double-blinded, placebo-controlled, randomized Phase 2b/Phase 3 trial of AV-101 in adults with PAH on top of standard of care.

We are enrolling patients in the Phase 3 portion of this trial and will announce the approximate number of patients we plan to enroll in the Phase 3 portion of the trial based on the topline results of the Phase 2b portion of the trial.

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.

We anticipate that topline data from the Phase 2b portion of this trial will be available in June 2024.

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

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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.

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 Scientific 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

Marinus Verwijs, our Chief Technical Officer, 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.

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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 Phase 2b/Phase 3 trial is designed to treat a similar patient population to the IMPRES trial, patients in WHO Functional Classes II-IV on top of standard of care 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 hyperproliferation in the pulmonary vasculature that causes the increased resistance to blood flow and heart failure.

Unlike approved treatments for PAH, which act primarily through vasodilation (prostacyclin pathway, endothelin pathway, and nitric oxide pathway agents), 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.

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● 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.

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.

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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 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.

In November 2023, we announced completion of enrollment in the Phase 2b portion and enrollment of the first patient in the Phase 3 portion of IMPAHCT, our Phase 2b/Phase 3 trial of AV-101 in adults with PAH on top of standard of care PAH therapies.

The Phase 2b portion of this trial will be a dose-ranging trial in which PVR will be the primary endpoint and we anticipate that topline data from the Phase 2b portion will be available in June 2024.

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.

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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.

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.

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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.

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 2023 was $6.2 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.

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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.

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.

Despite the availability of multiple agents within each treatment pathway and efforts to treat PAH more aggressively, the long term prognosis for patients with PAH remains poor.

Antiproliferative Medicines as a Novel Approach to Treating PAH

Sotatercept is poised to be the first approved PAH therapy directly targeting the underlying cell proliferation that leads to increased pulmonary arterial pressure, although the concept behind targeting cell proliferation to treat PAH is not new.

Sotatercept is 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 in patients taking one, two or three standard PAH therapies, 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.

Despite the significant improvement with sotatercept therapy in multiple efficacy endpoints, it is notable that ~60% of patients did not meet the prespecified multi-component criteria for improvement, ~60% of patients did not achieve “low risk status” on the simplified French risk model and 70% of patients did not improve in New York Heart Association Functional Class status demonstrating the continued significant unmet need in PAH.

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

PAH Prescriber Interest in Novel Agents

We conducted primary market research with approximately 150 PAH treating physicians to assess the demand for novel agents for the treatment of PAH.

Respondents were presented on a blinded basis with three hypothetical novel agents with efficacy and safety profiles reflective of results seen in PAH clinical trials associated with actual novel agents currently being studied and/or under regulatory review.

The majority of prescribers indicated a likelihood to utilize a therapeutic agent with characteristics similar to those of AV-101.

Our Approach, AV-101

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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.

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.

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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.

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.

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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.

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

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Inhaled iMatinib Pulmonary Arterial Hypertension Clinical Trial

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.

In November 2023, we announced completion of enrollment with 202 patients in the Phase 2b portion and enrollment of the first patient in the Phase 3 portion of IMPAHCT.

We anticipate that topline data from the Phase 2b portion of this trial will be available in June 2024.

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.

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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.

● We completed Phase 2b enrollment with 202 patients 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.

We anticipate that topline Phase 2b data will be available in June 2024.

● Part 3 enrollment began in November 2023 with completion of enrollment in the Phase 2b portion of the trial.

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

Once the final patient enrolled in the Phase 3 portion 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.

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.

We use third-party contract manufacturers for the production of our combination product, AV-101.

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

To be used in our inhaled product, the API requires an additional manufacturing step, which is completed at our contract manufacturing organization that complies with the FDA’s current GMP regulations.

The API is converted into drug product for aerosol use by one of our two contract fill/finish providers in the United States.

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 36 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.

Our API, finished product, and single-dose inhaler producers are accepted by the health authorities in all countries that are included in our ongoing global Phase 2b/Phase 3 clinical trial.

We are routinely manufacturing clinical supplies to ensure sufficient supplies are positioned at our global distribution partner for distribution to the active clinical sites.

In anticipation of a potential NDA filing, we are manufacturing 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

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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.

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.

As of March 20, 2024, we own six U.S.

patents, eleven U.S.

patent applications, no pending PCT international applications, and thirty 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.

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APPLICATION/ PATENT NO.

RELATED PRODUCT

PROTECTION SOUGHT

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Composition of Matter;

PCT/US20/32872

Composition of Matter;

International PCT

Composition of Matter;

202080051359.5

Composition of Matter;

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Composition of Matter;

10-2021-7041312

Composition of Matter;

PCT/US20/32874

International PCT

Republic of Korea

MX/A/2021/104029

Composition of Matter;

Combination Products;

BR1120210230149

Composition of Matter;

Combination Products;

PCT/US21/60526

Composition of Matter;

Combination Products;

International PCT

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

Composition of Matter;

PCT/US20/32872

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Composition of Matter;

202080051359.5

Composition of Matter;

5 unchanged sentences

Composition of Matter;

PCT/US20/32874

International PCT

Composition of Matter;

Combination Products;

Composition of Matter;

Combination Products;

Composition of Matter;

Combination Products;

Composition of Matter;

Combination Products;

Composition of Matter;

Combination Products;

202180076594.2

Composition of Matter;

Republic of Korea

MX/A/2021/104029

Combination Products;

Composition of Matter;

BR1120210230149

Combination Products;

Composition of Matter;

Combination Products;

Composition of Matter;

Combination Products;

PCT/US21/60526

Composition of Matter;

Combination Products;

International PCT

Composition of Matter

KW/P/2021/466

Composition of Matter

OM/P/2021/00467

Composition of Matter

QA/202111/000655

Composition of Matter

202280024931.8

Composition of Matter

P6002085/2021

Composition of Matter

PCT/US22/16422

Composition of Matter

International PCT

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

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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 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.

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

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.

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.

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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.

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

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

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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 intend to seek approval for AV-101 initially in patients for the treatment of PAH as an add-on therapy to currently approved standard of care .

We recognize that physicians have many treatment options for patients already on existing 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);

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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 (Enzyvant, Inc.).

To our knowledge, Tenax Therapeutics, Inc.

and Aerami Therapeutics, Inc.

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.

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.) under review by the FDA and EMA, and/or seralutinib (Gossamer Bio, Inc.).

To our knowledge, Aerami Therapeutics, Inc.

is developing other formulations of imatinib for PAH, and have completed a Phase 1 clinical trial and indicated they intend to pursue further clinical development .

Government Regulation

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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.

An IND application must become effective before human clinical trials may begin.

The IND application 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.

Accordingly, submission of an IND application 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.

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The cost of preparing and submitting an NDA is substantial.

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.

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.

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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.

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.

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.

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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 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 process.

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.

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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;

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.

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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 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.

This six-month exclusivity, which runs from the end of other exclusivity protection and patent terms, may be granted based on the voluntary completion of a pediatric trial in accordance with an FDA-issued “Written Request” for such a trial, provided that at the time pediatric exclusivity is granted there is not less than nine months of term remaining.

Orphan Drug Designation

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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.

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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.

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.

The Final Rule on ClinicalTrials.gov registration and reporting requirements became effective in 2017, and both the National Institutes of Health and the FDA have signaled the government’s willingness to begin enforcing those requirements against non-compliant clinical trial sponsors.

European Union—Process

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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.

To obtain regulatory approval of a product in the EU, we must submit an MAA.

The process for doing this depends, among other things, on the nature of the medicinal product.

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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;

(iii) contain a new active substance indicated for the treatment of certain diseases, such as HIV, 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.

Where the CHMP gives a positive opinion, the EMA provides the opinion together with supporting documentation to the European Commission, who makes the final decision to grant an MA, which is issued within 67 days of receipt of the EMA’s recommendations.

Accelerated assessment of an MAA will 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.

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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.

Under the decentralized procedure an identical dossier is submitted to the national competent authority of each of the Member States in which an MA is sought, one of which is selected by the applicant as the Reference Member State.

● Mutual recognition procedure.

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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.

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 the grant of an 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 an 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.

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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.

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 an 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;

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 condition;

(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;

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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.

An orphan medicinal product can also obtain an additional two years of market exclusivity in the EU for pediatric studies conducted in compliance with an agreed PIP.

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:

maintenance of market exclusivity.

At any time, an 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.

(ii) the MA holder for the authorized orphan product consents to a second orphan medicinal product application;

or (iii) the MA holder for the authorized orphan product cannot supply enough orphan medicinal product.

Pediatric Development

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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.

These penalties could include delays or refusal to authorize the conduct of clinical trials, or to grant an 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.

Reform of the Regulatory Framework in the European Union

The European Commission introduced legislative proposals in April 2023 that, if implemented, will replace the current regulatory framework in the EU for all medicines (including those for rare diseases and for children).

The European Commission has provided the legislative proposals to the European Parliament and the European Council for their review and approval.

In October 2023, the European Parliament published draft reports proposing amendments to the legislative proposals, which will be debated by the European Parliament.

Once the European Commission’s legislative proposals are approved (with or without amendment), they will be adopted into EU law.

Regulation of Combination Products

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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 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.

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 (i.e.

where the medicinal product and the device do not form a single product which is intended exclusively for use in the given combination and which is not reusable), 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 forth 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).

The dry powder delivery device used with AV-101 is classed as a class IIa device under the Medical Devices Regulation and this will need to be certified under the Medical Devices Regulation in due course as described below.

The current CE mark for the delivery device is in accordance with the Medical Devices Directive as a class I device.

Under the transitional provisions of the Medical Devices Regulation,

medical devices for which the conformity assessment procedure pursuant to the Medical Devices Directive did not require the involvement of a notified body, for which the declaration of conformity was drawn up prior to May 26, 2021 and for which the conformity assessment procedure pursuant to the Medical Device Regulation requires the involvement of a notified body, may be placed on the market or put into service until December 31, 2028, after which they must be re-certified under the Medical Devices Regulation.

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 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.

For a medical device to obtain a CE mark under the Medical Devices Regulation, the device 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.

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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.

For class IIa medical devices, 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.

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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.

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.

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.

However, notwithstanding that there is no wholesale recognition of EU pharmaceutical legislation under the TCA, under a new framework which was put in place by the Medicines and Healthcare products Regulatory Agency, or MHRA, the UK medicines and medical devices regulator, on January 1, 2024, the MHRA may take into account decisions on the approval of MAs from the EMA (and certain other regulators) when considering an application for a Great Britain or UK MA.

On February 27, 2023, the UK government and the European Commission announced a political agreement in principle to replace the Northern Ireland Protocol with a new set of arrangements, known as the “Windsor Framework”.

This new framework fundamentally changes the existing system under the Northern Ireland Protocol, including with respect to the regulation of medicinal products in the UK.

In particular, the MHRA will be responsible for approving all medicinal products destined for the UK market (i.e., Great Britain and Northern Ireland), and the EMA will no longer have any role in approving medicinal products destined for Northern Ireland.

A single UK-wide MA will be granted by the MHRA for all medicinal products to be sold in the UK, enabling products to be sold in a single pack and under a single authorization throughout the UK.

The Windsor Framework was approved by the EU-UK Joint Committee on March 24, 2023, so the UK government and the EU will enact legislative measures to bring it into law.

On June 9, 2023, the MHRA announced that the medicines aspects of the Windsor Framework will apply from January 1, 2025.

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.

, China or Japan), although data generated in United States or EU trials may be submitted in support of an 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

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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.

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.

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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.

EU 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.

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 EU 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.

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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.

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:

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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;

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.

● 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.

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● 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.

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;

● 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 licensed health care professionals, 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;

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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;

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;

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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.

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 into law, which eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source and innovator multiple source drugs, beginning January 1, 2024.

Due to the Statutory Pay-As-You-Go Act of 2010, estimated budget deficit increases resulting from the American Rescue Plan Act of 2021, and subsequent legislation, Medicare payments to providers will be further reduced starting in 2025 absent further legislation.

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

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;

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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.

Further, under the IRA, orphan drugs are exempted from the Medicare drug price negotiation program, but only if they have one orphan designation and for which the only approved indication is for that disease or condition.

If a product receives multiple orphan designations or has multiple approved indications, it may not qualify for the orphan drug exemption.

The implementation of the IRA is currently subject to ongoing litigation challenging the constitutionality of the IRA’s Medicare drug price negotiation program.

The effects of the IRA on our business and the healthcare industry in general is not yet known.

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President Biden has issued multiple executive orders that have sought to reduce prescription drug costs.

In February 2023, HHS also issued a proposal in response to an October 2022 executive order from President Biden that includes a proposed prescription drug pricing model that will test whether targeted Medicare payment adjustments will sufficiently incentivize manufacturers to complete confirmatory trials for drugs approved through FDA’s accelerated approval pathway.

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.

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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.

Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access

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.

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In addition, certain state and non-U.S.

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.

laws, such as the CCPA, 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.

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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.

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.

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

What changed 10-K

Item 1. Business