What changed in this filing

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Item 1. Business

2026-04-15 compared with 2025-03-31 · 359 added, 848 removed, 242 unchanged (83% of the section changed)

We are a clinical-stage biopharmaceutical company dedicated to the research, development and commercialization of innovative therapies for rare and severe diseases of the front and back of the eye.

Our product candidate, KPI-012, which we acquired from Combangio, Inc., or Combangio, on November 15, 2021, is a mesenchymal stem cell secretome, or MSC-S, and is currently in clinical development for the treatment of persistent corneal epithelial defects, or PCED, a rare disease of impaired corneal healing.

Based on the positive results of a Phase 1b clinical safety and efficacy trial of KPI-012 in patients with PCED, along with favorable preclinical safety and efficacy results, we submitted an investigational new drug application, or IND, to the U.S.

Food and Drug Administration, or FDA, which was accepted in December 2022.

In February 2023, we dosed our first patient in the United States in our CHASE ( C orneal H ealing A fter SE cretome therapy) Phase 2b clinical trial of KPI-012 for PCED, or the CHASE trial.

The CHASE trial is comprised of two patient cohorts.

On March 27, 2023, we announced positive safety data from the first cohort of the CHASE trial, which is an open-label study to evaluate the safety of the high dose of KPI-012 ophthalmic solution (3 U/mL) dosed topically four times per day, or QID, in two patients.

Both patients in the first cohort successfully completed eight weeks of dosing with no safety issues observed.

We have initiated the second and final patient cohort of the CHASE trial, which is a multicenter, randomized, double-masked, vehicle-controlled, parallel-group trial to evaluate the safety and efficacy of two doses of KPI-012 ophthalmic solution (3 U/mL and 1 U/mL) versus vehicle dosed topically QID for 56 days in approximately 90 adult patients.

To date, we have opened 45 trial sites for the CHASE trial in the United States.

We have also initiated several clinical trial sites in Argentina for the CHASE trial and we are in the process of initiating additional clinical trial sites in Latin America.

The primary endpoint of the CHASE trial is the complete healing of PCED as measured by corneal fluorescein staining.

To date, we have randomized 87 patients.

Upon review of the only masked screening and baseline data, we have decided to extend enrollment to account for 13 patients who were enrolled and treated based on the investigators’ determination of the presence of a PCED which was subsequently not verified by the central reading center.

We are targeting reporting topline safety and efficacy data from the CHASE trial in the third quarter of 2025.

If the results are positive, and subject to discussion with regulatory authorities, we believe this trial could serve as the first of two pivotal trials required to support the submission of a Biologics License Application, or BLA, for KPI-012 to the FDA.

KPI-012 has received Orphan Drug and Fast Track designations from the FDA for the treatment of PCED.

We believe the multifactorial mechanism of action of KPI-012 also makes our MSC-S a platform technology.

We are evaluating the potential development of KPI-012 for additional rare front-of-the-eye diseases, such as for the treatment of Limbal Stem Cell Deficiency, or LSCD, and other rare corneal diseases that threaten vision.

In addition, we have initiated preclinical studies under our KPI-014 program to evaluate the utility of our MSC-S platform for inherited retinal degenerative diseases, such as Retinitis Pigmentosa and Stargardt Disease.

We expect to commercialize in the United States any of our product candidates that receive marketing approval.

We previously developed and commercialized two marketed products, EYSUVIS ® (loteprednol etabonate ophthalmic suspension) 0.25%, for the short-term (up to two weeks) treatment of the signs and symptoms of dry eye disease, and INVELTYS ® (loteprednol etabonate ophthalmic suspension) 1%, a topical twice-a-day ocular steroid for the treatment of post-operative inflammation and pain following ocular surgery.

Both products applied a proprietary mucus-penetrating particle drug delivery technology, which we referred to as the AMPPLIFY ® Drug Delivery Technology.

On July 8, 2022, we sold to Alcon Pharmaceuticals Ltd.

and Alcon Vision, LLC, which we refer to collectively as Alcon, the rights to manufacture, sell, distribute, market and commercialize EYSUVIS and INVELTYS and to develop, manufacture, market and otherwise exploit the AMPPLIFY Drug Delivery Technology, which we collectively refer to as the Commercial Business.

Alcon also assumed certain liabilities with respect to the Commercial Business at the closing of the transaction.

Alcon paid us an upfront cash payment of $60.0 million upon the closing of the sale of the Commercial Business.

We are also eligible to receive from Alcon up to four commercial-based sales milestone payments as follows:

(1) $25.0 million upon the achievement of $50.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2028, (2) $65.0 million upon the achievement of $100.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2028, (3) $75.0 million upon the achievement of $175.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2029 and (4) $160.0 million upon the achievement of $250.0 million or more in aggregate worldwide net sales of EYSUVIS and INVELTYS in a calendar year from 2023 to 2029.

Each milestone payment will only become payable once, if at all, upon the first time such milestone is achieved, and only one milestone payment will be paid with respect to a calendar year.

In the event that more than one milestone is achieved in a calendar year, the higher milestone payment will become payable and the lower milestone payment will become payable only if the corresponding milestone is achieved again in a subsequent calendar year.

To date, no milestones have been achieved, and we have not received any milestone payments from Alcon.

The following table describes the stage of each of our development programs:

In this Annual Report on Form 10-K, unless the context otherwise requires, references to “we,” “us,” “our,” “our company,” “KALA,” “KALA BIO” and “Company” refer to KALA BIO, Inc.

and its subsidiaries.

We are a biopharmaceutical company in transition, evaluating the development of a dedicated, on-premises artificial intelligence (AI) infrastructure platform for the biotechnology industry.

Our current focus is leveraging our mesenchymal stem cell secretome (“MSC-S”) platform to test development of a scalable AI platform-as-a-service business to deploy secure, purpose-built AI systems directly within biotech and pharmaceutical client environments.

We have historically been engaged in the research, development and commercialization of innovative therapies for rare and severe diseases of the front and back of the eye.

Our lead product candidate was KPI-012, MSC-S, which we acquired from Combangio, Inc.

(“Combangio”) on November 15, 2021.

KPI-012 was in clinical development for the treatment of persistent corneal epithelial defects (“PCED”), a rare disease of impaired corneal healing.

Based on the results of a Phase 1b clinical safety and efficacy trial of KPI-012 in patients with PCED, we submitted an investigational new drug application to the U.S.

Food and Drug Administration (“FDA”), which was accepted in December 2022.

In February 2023, we dosed our first patient in the United States in our CHASE (Corneal Healing After SEcretome therapy) Phase 2b clinical trial of KPI-012 for PCED (the “CHASE trial”).

By September 2025, the CHASE trial did not meet its primary endpoints, and we determined to discontinue our development of KPI-012 and the MSC-S platform.

We have since expanded upon our business to evaluate strategic alternatives for our legacy MSC-S assets and capitalize on the substantial intellectual property (IP), proprietary biological datasets, and research experience generated during the clinical trials by starting development of an AI platform.

On March 3, 2026 (subsequent to the fiscal year ended December 31, 2025), we entered into an exclusive license for the Researgency AI research platform (“Researgency”) from Younet AI (“Younet”), through which we intend to test and assess the feasibility of offering a dedicated AI infrastructure partner for the biotechnology industry.

Our goal is to enable companies of all sizes to unlock the value of their proprietary biological data without surrendering control of it through the development of a specialized agentic AI research platform.

Strategic Transition

Suspension of Clinical Trial

On September 28, 2025, the board of directors of the Company (the “Board”) determined to cease development of KPI-012 and the MSC-S platform because the CHASE trial did not meet the primary endpoint of complete healing of PCED as measured by corneal fluorescein staining.

The CHASE trial also failed to achieve statistical significance for key secondary efficacy endpoints, with no meaningful difference observed between either KPI-012 treatment arm and the placebo arm.

In connection with such decision, we implemented a reduction in our workforce of approximately 19 employees, or approximately 51%.

Oxford Foreclosure and Workforce Terminations

On September 29, 2025, we received a notice of default under our senior secured credit facility with Oxford Finance LLC (“Oxford Finance”).

Oxford Finance asserted its remedies under the Loan and Security Agreement, dated as of May 4, 2021, by and among us, Combangio and Oxford Finance, as lender and collateral agent (as amended, the “Loan Agreement”), including exercising control over substantially all of our cash, and informed us of its intention to foreclose on our remaining assets.

As a result of these restrictions and the anticipated foreclosure process, we terminated substantially all of our remaining employees other than those needed to support limited activities associated with the foreclosure process.

Oxford Finance subsequently paused its foreclosure efforts to permit us to pursue a short-term financing transaction and related negotiations.

In November 2025, we entered into a settlement arrangement with Oxford Finance, and in December 2025, we satisfied the amounts due under that arrangement, resolving the obligations under our credit facility with Oxford Finance.

Also in November 2025, we entered into a short-term convertible loan arrangement with an individual lender to provide interim liquidity, which was repaid in full in December 2025.

Our current activities comprise of (i) evaluating strategic alternatives for our legacy MSC-S assets and related intellectual property and (ii) early-stage development of a prospective AI platform-as-a-service offering, Researgency, intended for deployment within biotechnology and pharmaceutical customer environments.

While we intend to assess the commercial viability of offering dedicated, on-premises AI systems to biotechnology companies, there can be no assurance that we will successfully develop, commercialize or generate revenue from this initiative.

Younet AI Licensing Agreement and the Researgency Platform

Following the decision to suspend the CHASE trial, and as part of our strategic transition, on March 3, 2026 (subsequent to the year-end), we entered into an exclusive licensing agreement with Younet (the “Younet License Agreement”), pursuant to which we secured worldwide exclusive rights to Researgency, specifically adapted for biotechnology applications.

Under our license for Researgency, we plan to evaluate whether the platform can be configured to support biotechnology research workflows and data-governance requirements.

Specific technical configurations and commercialization plans, including pricing and service levels, remain under development and subject to customer requirements and applicable laws and guidance.

Changes in Leadership

During the fiscal year ended December 31, 2025, and through the date of this filing, the Company experienced significant changes in its executive leadership and the composition of its Board.

On February 11, 2025, Mark Iwicki resigned as Chief Executive Officer.

The Board appointed Todd Bazemore as interim Chief Executive Officer and principal executive officer on the same date.

On August 29, 2025, Mr.

Bazemore was appointed as Chief Executive Officer and President of the Company and was elected as a Class II Director of the Board.

On October 19, 2025, in connection with a workforce reduction, the Board terminated Mr.

Bazemore's employment as President and Chief Executive Officer, effective immediately.

Bazemore continued to serve as a director of the Company and as the Company's principal executive officer.

On November 21, 2025, the Board terminated the employment of Mary Reumuth, the Company's Chief Financial Officer and Secretary.

On the same date, the Board appointed David Lazar as Chief Executive Officer, principal executive officer, and principal financial officer of the Company, each effective in connection with the closing of the transactions contemplated by the November 2025 Purchase Agreement (as defined herein).

Lazar was also elected as a Class II Director and the Chair of the Board, replacing Mr.

Iwicki as Chair.

Iwicki continued to serve as a director.

On December 19, 2025, each of Marjan Farid, M.D., Andrew I.

Koven, Mark Iwicki, Todd Bazemore, C.

Daniel Meyers, and Howard B.

Rosen tendered their resignations as directors of the Company, each effective as of January 30, 2026.

Pursuant to the terms of the November 2025 Purchase Agreement (as defined herein), AK Holdings Group Inc.

(“AK Holdings”) had the right to nominate up to eight individuals to serve as directors of the Company.

On January 30, 2026, the Board, upon the recommendation of the Nominating and Corporate Governance Committee, appointed five nominees of AK Holdings as directors:

Avi Minkowitz as a Class II Director, Hillel Posen and Chaim (Dovi) Berger as Class I Directors, and Yonatan Colman and Brendan Purdy as Class III Directors.

On February 2, 2026, Mr.

Lazar resigned as Chief Executive Officer and Chief Financial Officer of the Company, effective immediately, while remaining a director.

On the same date, the Board appointed Avi Minkowitz, a current director, as Chief Executive Officer and Chief Financial Officer.

On February 16, 2026, Mr.

Lazar resigned from the Board, effective immediately.

Minkowitz currently serves as our Chief Executive Officer and Chief Financial Officer.

The Company’s Business Strategy

Our strategy is to pursue two complementary business lines:

(i) the monetization of a proprietary biologics asset portfolio centered on the Company's MSC-S platform and its associated IP, and (ii) the development of the Researgency business, through which the Company intends to deploy Researgency to provide a dedicated, on-premises AI infrastructure solution for biotechnology and pharmaceutical companies.

Key elements of our current strategy include:

● Preserve and seek to monetize our MSC-S biologics asset portfolio .

We are preserving our MSC-S platform intellectual property, including the KPI-012 and KPI-014 product candidates and related patents and know-how, and are evaluating strategic options with respect to those assets, including licensing, sale, out-licensing, collaboration, and other arrangements with one or more third parties.

We may evaluate preclinical activities in the future if we secure additional funding and identify suitable development partners.

We do not have any ongoing clinical trials as of the date of this filing.

● Develop and aim to deploy Researgency as a dedicated biotechnology industry solution .

Through our exclusive license for Researgency, we intend to serve as a dedicated AI infrastructure partner for biotechnology and pharmaceutical companies.

Researgency is designed for on-premises deployment within client environments, enabling customers to leverage advanced AI capabilities while maintaining complete control over their proprietary biological data and intellectual property.

We also intend to offer the platform on a platform-as-a-service basis, together with implementation support, maintenance subscriptions, and data analytics services, targeting mid-size biotechnology companies, contract research organizations, and pharmaceutical companies as our primary customer base.

Any commercialization, pricing and feature set remain subject to further development, validation, applicable regulatory compliance and customer demand.

● Evaluate Researgency using our proprietary KPI-012 research dataset .

As an initial step toward potential commercialization of Researgency, we intend to use our accumulated KPI-012 clinical development dataset, which includes data from 79 patients across 37 clinical trial sites together with related regulatory submission materials, as a proof-of-concept validation environment.

This self-validation approach is designed to generate reference case studies and to refine platform capabilities using real-world biotechnology research data prior to commercial deployment with external customers.

There can be no assurance that these efforts will identify commercially actionable opportunities.

● Pursue strategic arrangements across both business lines .

We plan to pursue value-driven strategic transactions across both our biologics portfolio and our Researgency business, which may include licensing

arrangements, collaborations, co-development agreements, and other strategic partnerships.

With respect to our biologics portfolio, such transactions may include in-licensing or acquisition of complementary product candidates or technologies, particularly for rare ophthalmic diseases.

With respect to our Researgency business, such transactions may include strategic partnerships with pharmaceutical companies, academic institutions, and other parties seeking dedicated AI research infrastructure.

Industry Background

The pharmaceutical and biotechnology sectors operate within regulatory frameworks where data management is a matter of compliance.

Clinical trial data is governed by the FDA.

Patient data must adhere to requirements of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and, where applicable, other domestic and foreign privacy laws, as well as contractual and regulatory obligations applicable to research activities.

Regulatory submission documents can be used as evidence in enforcement actions.

Intellectual property in active development has commercial value that partly relies on maintaining confidentiality until patent approval or publication.

Our goal is to utilize biotechnology research from experimental methods to intelligent, predictive systems designed to minimize risk, speed up timelines, and enhance outcomes throughout the therapeutic development process.

We believe our proposed AI initiatives may address certain operational challenges observed in biotechnology research and development as set forth below:

Data Protection Requirements:

Complex regulatory frameworks governing biological research data, requiring specialized security architectures and compliance monitoring systems.

Patient Data Privacy Obligations:

HIPAA, state privacy laws, the General Data Protection Regulation (“GDPR”), and other privacy regulations thus create stringent requirements for data handling, storage, and processing in clinical research contexts, the scope and application of which continue to evolve.

Intellectual Property Security:

Protection of proprietary research data, therapeutic targets, and competitive intelligence from unauthorized access or disclosure.

Substantial Regulatory Compliance Costs:

FDA submission requirements, clinical trial protocols, and regulatory pathway navigation represent significant operational expenses.

Expensive Research Adaptation Requirements:

Costs associated with modifying research protocols, clinical trial designs, informed consents and other study-related documents and therapeutic approaches based on evolving data and regulatory guidance.

Complex Commercialization Processes:

Multi-stage pathway from research discovery through regulatory approval to market introduction, requiring coordinated expertise across multiple domains.

Extended Development Timelines:

Multi-year development cycles create substantial capital requirements and opportunity costs for biotechnology companies.

We are evaluating AI capabilities, including autonomous task orchestration, integration with internal data sources and auditability, that may support biotechnology research workflows.

Potential use cases under consideration include analysis of clinical datasets, literature synthesis and report generation within controlled environments.

Any deployment would be designed to align with applicable regulatory expectations regarding clinical development, data integrity, validation and governance, to the extent such expectations are clarified and become applicable to our platform.

We anticipate that customer interest, if any, will focus on private deployments operated within customer infrastructure (on-premises or private cloud) so that proprietary data remain within the customer’s control.

Features under evaluation include access controls, audit logging, model validation procedures and, where appropriate and permitted, fine-tuning on customer datasets with the customer retaining ownership of model artifacts.

features and capabilities offered may vary based on customer requirements, technical feasibility and applicable regulatory guidance.

Agentic AI and Private Enterprise LLM

One variation of “Agentic” AI is that it describes a system's ability to act on data.

A typical AI assistant responds to questions when asked.

An agentic AI system is generally designed to autonomously pursue specific goals, breaking down complex objectives into smaller tasks, completing each one step by one, assessing results, and adjusting its strategy based on what it learns along the way.

Typical capabilities of agentic AI systems may include goal-directed execution, external tool and database integration, context persistence across extended workflows, self-correction when intermediate outputs fail to meet quality criteria, and multi-agent coordination in which specialized agents perform discrete tasks orchestrated into a unified deliverable.

In biotechnology research, this difference becomes practically important.

Analyzing a failed clinical trial dataset for subgroup signals is a complex, multi-step process, involving loading and cleaning data, developing and testing hypotheses, cross-referencing findings with published literature, evaluating statistical significance, ranking results by biological plausibility, and preparing a structured report for scientific review.

An agentic system can manage the entire workflow, while a conventional AI tool generally only answers individual questions.

A large language model (“LLM”) is a type of artificial intelligence trained on large volumes of text, which may include scientific literature, regulatory filings, clinical records, and financial documents.

LLMs are designed to read, summarize, reason about, and generate language across a range of tasks by constructing internal representations of relationships between concepts, enabling them to synthesize information from multiple sources and produce analytical outputs.

For example, when a researcher asks an LLM to identify patterns in a clinical dataset, a model maybe able reason through the data's structure, apply domain knowledge encoded during training, and produce interpretations more quickly than a human analyst.

A significant advance in enterprise AI is the development of deployment architectures that allow organizations to use models on their own proprietary data without sending it to external servers.

Sending proprietary biological data, regulatory strategy documents, or unpublished efficacy results through a public AI interface introduces legal risks, intellectual property concerns, and potential regulatory non-compliance.

A private enterprise LLM deployment allows an organization to operate these models within its own infrastructure, whether on-premises or in a dedicated private cloud environment, so that proprietary data is not transmitted to external servers.

This architecture is intended to mitigates the intellectual property, data sovereignty, and regulatory compliance risks associated with processing sensitive information, including unpublished clinical results, regulatory strategy documents, and other proprietary biological data.

A private deployment may also enable, where appropriate and permitted by applicable governance requirements, fine-tuning of the model on the organization's proprietary datasets, with the organization retaining full ownership of any resulting model artifacts.

Fine-tuning may allow the model to reason over organization-specific data, such as internal trial documentation, regulatory submissions, and laboratory results, with the same depth applied to publicly available information.

The Researgency Platform

Through our license for Researgency, we plan to evaluate whether the platform can be adapted to meet biotechnology research workflow, data security and governance requirements observed in our historical operations.

We are in the early stages of assessment and have not recognized revenue from this initiative.

The Infrastructure Layer for Private Enterprise AI

Our ability to commercialize Researgency depends in part on Younet’s performance of development and infrastructure obligations and our successful integration, validation and deployment of the licensed technology for biotechnology research workflows.

Researgency is intended to operate on infrastructure provided by Younet, which provides a technical environment for private enterprise AI deployment.

For many biotechnology organizations, this is not a core competency, and the development costs and timelines are prohibitive.

Under the Researgency license, Younet may provide certain infrastructure components that support private enterprise AI deployment, including model hosting,

secure environments, data ingestion pipelines, retrieval systems, access controls, audit logging and maintenance.

Any commercial offering would be designed to permit customers to control their proprietary data within their own environments.

Specific terms and service levels will be finalized if and when we enter into customer agreements.

KPI-012 Dataset for Researgency

We expect to first evaluate the platform using our accumulated research data from the KPI-012 development program.

Potential objectives include assessing platform functionality with real-world biotechnology data, informing future development priorities and, if appropriate, preparing internal case studies.

This approach offers several expected strategic benefits including:

(1) validating platform capabilities with real-world biotechnology data, (2) creating reference case studies for commercial use, (3) refining platform functionality based on actual research needs, and (4) demonstrating value creation from previously unsuccessful therapeutic development programs.

These efforts may not result in commercially deployable features.

The KPI-012 dataset includes comprehensive clinical trial data from 79 patients across 37 sites, regulatory submission materials, safety profiles, efficacy metrics, and documentation of interactions with the FDA, which produces a vast amount of biological and clinical data.

While the CHASE trial did not outperform placebo on the primary endpoint, we plan to analyze the dataset for potential signals, including subgroup responses, biomarkers, dosing or safety insights.

Such analyses are exploratory and may not support further development.

Core features of KALA’s goals include:

● Multi-agent orchestration for biotechnology workflows (e.g., elements of regulatory submissions, clinical trial design and data analysis).

● Integration with biomedical databases, regulatory repositories and clinical research datasets.

● Audit trails, access controls and validation procedures designed to support compliance frameworks;

accountability for compliance would remain with the sponsor organization.

● On-premises or private-cloud deployment options intended to support data sovereignty.

● Mechanisms for ongoing enhancement based on customer data, with data privacy and isolation.

● Application programming interfaces (APIs) for integration with laboratory information management, clinical trial management and regulatory submission systems.

We are evaluating specialized functional modules potentially applicable to biotechnology and pharmaceutical research, including:

● Clinical Trial Intelligence:

AI agents that may specialize in protocol design, patient stratification, site selection, and regulatory submission preparation, potentially drawing on validated clinical development experience.

● Regulatory Pathway Optimization:

Analysis of FDA guidance, submission requirements, and approval pathways using predictive modeling that may help to estimate regulatory success likelihood;

conclusions will not be guaranteed, and accountability for compliance would remain with the sponsor organization.

● Biological Data Analysis:

Advanced pattern recognition and hypothesis generation using biological datasets from KALA's clinical programs and regulatory submissions.

● Intellectual Property Management:

Patent landscape analysis, competitive intelligence monitoring, and IP strategy development capabilities that may be integrated with research discovery processes.

● Safety and Efficacy Modeling:

Predictive analytics that may help forecast therapeutic safety profiles and efficacy based on validated clinical trial data and regulatory feedback;

conclusions will not be guaranteed.

● Commercialization Strategy:

Market analysis, competitive positioning, and go-to-market planning tailored specifically for biotechnology therapeutic development.

• Responder Analysis:

Exploratory evaluation of biological plausibility in identified subgroups to inform any internal assessment of whether a targeted re-development program is scientifically warranted.

• Investment Recommendation:

Evidence-based analyses on whether KPI-012 or KPI-014 warrants additional investment or out-licensing to a strategic partner.

• Partner-Ready Data Package:

A structured data set suitable for sharing with potential licensing partners, co-development collaborators, or IP acquirers, subject to appropriate confidentiality and data-protection controls.

Our platform is being designed for use in customer environments that may include proprietary biological datasets, clinical trial data, draft regulatory submissions and other sensitive materials.

As such, our product development emphasizes auditability, access controls, logging, and data-handling configurations intended to support customer compliance with applicable privacy, data-governance and research-integrity frameworks.

We anticipate that customers will retain ownership and control over their data and, where applicable, any customer-specific model artifacts produced within their environment.

The Placebo Response Question

Our early approach focuses on early testing as to whether the CHASE trial had an unusually high placebo response rate, which is a well-documented phenomenon in eye disease trials.

The act of applying any drop, combined with increased clinical attention, can produce meaningful improvement in the control arm, making it difficult for an active treatment to demonstrate statistical superiority.

In such event, even a well-conducted responder subgroup analysis will not salvage the program.

However, this is what the data review is intended to identify.

We believe this analysis is useful to making go/no-go decisions, communicating transparently with future partners or licensors, and avoiding further capital investment in a structurally compromised trial design.

There is no assurance that any such assessment will support further development.

Phased Implementation Strategy

Our implementation roadmap adopts a structured, phased approach with internal milestones, metrics and decision points.

The timing and scope of each phase will depend on product development progress, funding and customer interest.

There can be no assurance that we will be successful in executing any phase of this strategy, and our ability to do so is subject to significant risks and uncertainties, including the risks described in the “Risk Factors” section of this Annual Report on Form 10-K.

Phase 1 Goals:

Self-Validation and Platform Refinement (next ~1-6 months)

• Deploy the platform on our KPI-012 dataset for internal evaluation

• Initiate development of internal case studies and assess feasibility of agent-based workflows

• Refine capabilities based on observed research needs and technical performance

• Develop validation and governance documentation aligned with applicable regulatory expectations

• Explore scientific collaborations to reassess potential development pathways

• Internal Metrics :

Data processing accuracy benchmarks, system performance and documentation completeness

Phase 2 Goals:

Strategic Customer Acquisition (next ~12 months)

• Engage with potential pilot customers to evaluate implementation feasibility and develop case studies

• Define pricing, support and customer success metrics

• Expand capabilities based on feedback and market requirements

• Internal Metrics :

Engagement pipeline, pilot outcomes, satisfaction indicators and utilization measures

Phase 3 Goals:

Market Expansion and Scale (~2027 onwards)

Grow active customer base across target segments, if Phases 1–2 support commercialization

Develop strategic partnerships with pharmaceutical companies and CROs

Expand capabilities and market reach through product development and partnerships

Internal Metrics :

Revenue scale, competitive positioning and partnership development

Our Historical Business

KPI-012 and our MSC-S Platform

Prior to our strategic transition, our lead product candidate was KPI-012, a novel, human bone-marrow derived MSC-S composed of biologically active components secreted from mesenchymal stem cells, such as growth factors, protease inhibitors, matrix proteins and neurotropic factors, that had been shown in preclinical studies by Combangio to facilitate corneal healing.

KPI-012 had received Orphan Drug and Fast Track designations from the FDA for the treatment of PCED in April 2023.

We have retained worldwide commercial rights for our MSC-S platform, including KPI-012 and KPI-014.

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patent applications covering the MSC-S platform is currently in prosecution.

Our goal is to become a leading biopharmaceutical company dedicated to the research, development and commercialization of innovative therapies for rare and severe diseases of the front and back of the eye.

Key elements of our strategy include:

● Advance the clinical development of, and seek regulatory approval for, KPI-012 for the treatment of PCED.

KPI-012 is a novel, human bone-marrow derived MSC-S currently in clinical development for the treatment of PCED.

A PCED is a persistent non-healing corneal defect or wound that is refractory to conventional treatments.

On March 27, 2023, we announced positive safety data from the first cohort of the CHASE trial and subsequently initiated the second and final patient cohort.

We are targeting reporting topline safety and efficacy data for the CHASE trial in the third quarter of 2025.

If approved, we intend to commercialize KPI-012 with a small, targeted, internal sales force in the United States.

We also expect to explore commercialization of KPI-012 for the treatment of PCED in certain markets outside the United States utilizing a variety of collaboration, distribution, co-promotion and other marketing arrangements with one or more third parties.

● Advance KPI-012 for additional rare ocular surface disease indications and KPI-014 for rare inherited retinal degenerative diseases.

We are also evaluating the potential of KPI-012 to treat other rare front-of-the-eye diseases, such as LSCD and other rare corneal diseases that threaten vision.

In addition, we have initiated preclinical studies of KPI-014, our preclinical program evaluating the utility of our MSC-S platform for inherited retinal degenerative diseases, such as Retinitis Pigmentosa and Stargardt Disease.

● Business development through selective transactions.

We plan to pursue value-driven business development opportunities as they arise in order to enhance our business and product pipeline, which may include opportunistically in-licensing or acquiring the rights to complementary products, product candidates and technologies, particularly for the treatment of rare ophthalmic diseases.

We also plan to explore a variety of transactions to maximize the value of our assets, including out-licensing transactions, collaborations, distributions and other development and marketing arrangements with one or more third parties for our product candidates.

Our Clinical-Stage Product Candidate

KPI-012 for Persistent Corneal Epithelial Defects

Our Previous Clinical-Stage Product Candidate

Persistent Corneal Epithelial Defects Overview

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The drug substance for KPI-012 is produced as a chemically-defined cell-free solution followed by formulation and filling of the drug product in non-preserved single dose units.

We believe that KPI-012’s multi-factorial mechanism of action has the potential to normalize the impaired healing in PCED and other severe ocular surface diseases driven by impaired healing.

As such, we believe KPI-012 offers a potentially promising approach for the treatment of PCED and other ocular surface diseases across multiple etiologies.

Key biological factors contained in KPI-012 and their potential wound healing functions are shown below:

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Promote maintenance of neurons to support corneal health

The multifactorial mechanism of action of KPI-012 is thought to be responsible for the significant wound healing activity observed in Combangio’s preclinical animal models and in the completed Phase 1b clinical trial.

KPI-012 has received Orphan Drug and Fast Track designations from the FDA for the treatment of PCED.

CHASE 2b Clinical Trial of KPI-012 and Clinical Development Plan of KPI-012

We are initially developing KPI-012 for the treatment of PCED.

CHASE 2b Clinical Trial of KPI-012

Our initial goal was to develop KPI-012 for the treatment of PCED.

Combangio completed a Phase 1b clinical efficacy trial in nine patients with PCED in Mexico City, Mexico.

Based on the results of this Phase 1b clinical trial, we initiated a full preclinical development program and submitted an IND application to the FDA for KPI-012, which was accepted in December 2022.

Based on the results of this Phase 1b clinical trial, we had initiated a full preclinical development program and submitted an Investigational New Drug (“IND”) application to the FDA for KPI-012, which was accepted in December 2022.

In February 2023, we dosed the first patient in the CHASE trial of KPI-012 in patients with PCED in the United States.

The CHASE trial is comprised of two patient cohorts.

The CHASE trial was comprised of two patient cohorts.

On March 27, 2023, we announced positive safety data from the first cohort of the CHASE trial, which was an open-label study to evaluate the safety of the high dose of KPI-012 ophthalmic solution (3 U/mL) dosed topically QID in two patients.

Both patients in the first cohort successfully completed eight weeks of dosing with no safety issues observed.

ophthalmic solution (3 U/mL and 1 U/mL) versus vehicle dosed topically QID for 56 days in approximately 90 adult patients with PCED.

The trial has an 8-week treatment period with evaluations at frequent times during the dosing period and at 10 weeks and 26 weeks.

To date, we have opened 45 trial sites for the CHASE trial in the United States.

We have also initiated several clinical trial sites in Argentina for the CHASE trial and we are in the process of initiating additional clinical trial sites in Latin America.

The primary endpoint of the CHASE trial is the complete healing of the PCED as measured by corneal fluorescein staining using a central-reading center assessment of corneal fluorescing staining photographs.

To date, we have randomized 87 patients.

We are targeting reporting topline safety and efficacy data from the CHASE trial in the third quarter of 2025.

The second cohort of the CHASE trial was a multicenter, randomized, double-masked, vehicle-controlled, parallel-group trial to evaluate the safety and efficacy of two doses of KPI-012 ophthalmic solution (3 U/mL and 1 U/mL) versus vehicle dosed topically QID for 56 days in approximately 90 adult patients with PCED.

The trial had an 8-week treatment period with evaluations at frequent times during the dosing period and at 10 weeks and 26 weeks.

We previously opened 45 trial sites for the CHASE trial in the United States and initiated clinical trial sites in Argentina .

The primary endpoint of the CHASE trial was the complete healing of the PCED as measured by corneal fluorescein staining using a central-reading center assessment of corneal fluorescing staining photographs.

Phase 1b Clinical Trial Results of KPI-012

Combangio conducted a Phase 1b clinical trial of KPI-012 in Mexico City, Mexico during 2020 and 2021, consisting of three subjects without active corneal disease, or the safety cohort, who were dosed twice a day (1 U/mL) for one week and nine patients with PCED, or the PCED cohort, who were dosed twice a day (1 U/mL) for up to eight weeks.

Key inclusion criteria for the PCED cohort included:

● Subjects with PCED of at least 10 days without improvement from one or more conventional non-surgical treatments in study eye due to any of the following:

- NK, provided there was no active herpetic infection of the eye in the prior three months

- Corneal Burns (alkali, acid and thermal)

- Post-photorefractive Keratectomy

- Post-corneal Transplant Surgery

- Corneal epithelial debridement resulting from Diabetic Vitrectomy Surgery

- Keratoconjunctivtis sicca

- Sj ö gren’s

- Corneal cross-linking

● Subjects with bilateral corneal burns could only have one eye entered into the clinical trial

● Any previous treatment was stopped except for the study medication

Combangio had conducted a Phase 1b clinical trial of KPI-012 in Mexico City, Mexico during 2020 and 2021, consisting of three subjects without active corneal disease, or the safety cohort, who were dosed twice a day (1 U/mL) for one week and nine patients with PCED, or the PCED cohort, who were dosed twice a day (1 U/mL) for up to eight weeks.

Key inclusion criteria for the PCED cohort included subjects with bilateral corneal burns who could only have one eye entered into the clinical trial;

subjects whose previous treatment were stopped except for the study medication;

and subjects with PCED of at least 10 days without improvement from one or more conventional non-surgical treatments in the study eye due to any of the following:

NK (provided there was no active herpetic infection of the eye in the prior three months), corneal burns (alkali, acid, and thermal), post-photorefractive keratectomy, post-corneal transplant surgery, corneal epithelial debridement resulting from diabetic vitrectomy surgery, trauma, keratoconjunctivitis sicca, Sjögren's, or corneal cross-linking.

The participants in the Phase 1b trial were treated with KPI-012 topically twice a day, with the subjects in the safety cohort treated for one week and patients in the PCED cohort treated between one to eight weeks.

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As depicted in Figure 1 below, six of the eight patients in the PCED cohort (75%) who completed the trial achieved complete healing of the lesion after four weeks of treatment, with the two other patients experiencing some clinical improvement but not complete healing.

Four of eight patients in the PCED cohort (50%) achieved complete

healing of the lesion after one week of treatment and the other two patients achieved complete healing within two to four weeks of initiation of treatment with KPI-012.

Four of eight patients in the PCED cohort (50%) achieved complete healing of the lesion after one week of treatment and the other two patients achieved complete healing within two to four weeks of initiation of treatment with KPI-012.

All six of the patients who achieved complete healing remained healed through the follow-up period of the trial, which ranged between eight to 19 weeks.

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KPI-012 Preclinical Studies and Results

KPI-012 was evaluated by Combangio in a number of preclinical studies.

KPI-012 was previously evaluated by Combangio in a number of preclinical studies.

In these studies, KPI-012 promoted rapid ocular re-epithelialization and mitigated scarring and neovascularization in a number of well-established animal models.

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In vivo Mechanical Wound Studies of Activity

Combangio also evaluated the activity of KPI-012 in a mechanical corneal injury mouse model.

Combangio also previously evaluated the activity of KPI-012 in a mechanical corneal injury mouse model.

In this model, a circular area on the surface of the cornea was debrided (mechanically scraped) to remove the epithelial layer and create a circular wound.

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(B) Treatment with KPI-012 resulted in more rapid complete healing and a greater percentage of completely healed eyes (dashed line), relative to vehicle-treated eyes (solid line).

Other Potential Indications for KPI-012

We believe the multifactorial mechanism of action of KPI-012 also makes it a platform technology, and we are evaluating the potential development of KPI-012 for additional rare front-of-the-eye diseases, such as for the treatment of LSCD and other rare corneal diseases that threaten vision.

LSCD is an ocular surface disease characterized by the loss or deficiency of stem cells in the junction of the cornea and limbus, where they play an essential role in the generation and repopulation of corneal epithelial cells.

When the limbal stem cell population is reduced or depleted, the ability of the corneal epithelium to repair and renew itself is compromised, which can result in recurrent epithelial breakdown, neovascularization, conjunctival overgrowth and other sequalae that can lead to loss of corneal clarity and vision impairment, as well as significant pain and diminished quality of life.

With the exception of the autologous stem cell product Holoclar, which is approved in the European Union for treatment of LSCD caused by ocular burns, there are currently no approved pharmaceutical products for the treatment of LSCD and there are an estimated 100,000 patients in the United States suffering from this disease.

We believe these patients may be appropriate candidates for KPI-012 to maintain the integrity of the ocular surface and to avoid the vision impairment and pain associated with the disease.

In addition to the effects of KPI-012 on corneal healing observed in both animal models and in PCED patients, there is data in the literature that suggest that MSC-S can restore the limbal stem cell niche, which would be of significant benefit in both partial or complete LSCD.

Potential Indications for KPI-014

We are also aiming to leverage the manufacturing and delivery expertise gained from KPI-012 development to develop a unique secretome formulation – designated as KPI-014 – specific for inherited retinal degenerative diseases.

We have initiated preclinical studies under our KPI-014 program to evaluate the utility of our MSC-S platform for inherited retinal degenerative diseases, such as Retinitis Pigmentosa and Stargardt Disease.

MSC-S therapies have shown great promise to treat inherited retinal diseases, or IRDs, with the recognition that they function through their secretome (i.e., the secretion of paracrine factors that enhance retinal cell function and survival).

Based on the manufacturing and delivery expertise gained from KPI-012 development, we had also initiated preclinical studies under our KPI-014 program to evaluate the utility of our MSC-S platform for inherited retinal degenerative diseases, such as Retinitis Pigmentosa and Stargardt Disease.

These preclinical activities have since been suspended in connection with our determination to cease development of KPI-012 and our MSC-S platform.

MSC-S therapies have shown great promise to treat inherited retinal diseases (“IRDs”), with the recognition that they function through their secretome (i.e., the secretion of paracrine factors that enhance retinal cell function and survival).

We believe an MSC-S engineered for intravitreal delivery may provide an improved treatment option for IRDs as compared to the traditional MSC-based approach.

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With over 280 different IRD-associated genes, a therapy broadly effective for most IRDs does not currently exist, leaving patients with little-to-no options to slow disease progression and vision loss.

We are developing KPI-014 with the goal of providing a broad, genotype-agnostic, therapeutic benefit to reduce vision loss and improve quality of life for patients suffering from inherited retinal degenerative diseases.

We were previously developing KPI-014 with the goal of providing a broad, genotype-agnostic, therapeutic benefit to reduce vision loss and improve quality of life for patients suffering from inherited retinal degenerative diseases.

Competition in Artificial Intelligence Platform Services

The market for artificial intelligence platforms serving the biotechnology and pharmaceutical industries is rapidly evolving and intensely competitive.

We expect to face competition from companies that have developed, or are developing, AI platforms and tools specifically designed for drug discovery and development, as well as from large technology companies offering general-purpose AI infrastructure solutions.

Many companies that have developed AI-enabled drug discovery and research platforms have developed computational platforms designed to accelerate drug discovery and development.

Many of these companies have significantly greater financial resources, larger research and development teams, and more established commercial relationships than we do.

We believe that the key competitive factors in the AI platform market for biotechnology include data sovereignty architecture, depth of domain expertise in biotechnology regulatory affairs and clinical development, breadth of functional platform capabilities, pricing, and the availability of validated reference use cases.

We believe that our on-premises deployment architecture, combined with the domain expertise and proprietary biological datasets we have accumulated through our own clinical development programs, provides meaningful differentiation from existing competitors.

However, there can be no assurance that we will be able to successfully compete in this market or that competitors will not develop superior technologies or capabilities before we are able to establish a commercial presence.

Biotechnology and Pharmaceutical Competition

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

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These competitors also compete with us in recruiting and retaining qualified scientific, sales and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

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

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 affecting the success of KPI-012 and any other product candidates that we develop are the product candidate’s efficacy, safety, method of administration, convenience, price, the level of generic competition and the availability of insurance coverage and reimbursement from government and other third-party payors.

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In addition, our ability to compete may be affected because in many cases insurers or other third-party payors seek to encourage the use of generic products.

Competition in PCED

There is currently a significant unmet need for therapies to effectively treat PCED.

Conventional therapies, which include bandage contact lenses, autologous serum and surgery, are usually ineffective in overcoming the dysregulation present in multiple cellular pathways that may need to be addressed to heal a PCED.

Surgical procedures used in the treatment of PCED include tarsorrhaphy, corneal epithelial stem cell transplants and corneal transplants which are used to aid in restoration and maintenance of vision capabilities.

There is one approved prescription pharmaceutical product in the PCED space.

Oxervate (cenegermin-bkbj), which was approved in August 2018 for the treatment of NK, a degenerative disease characterized by decreased corneal sensitivity and poor corneal healing, which we believe to be the primary underlying etiology of approximately one-third of all PCED cases.

Oxervate is a topical eye drop that is administered six times per day at two-hour intervals for eight weeks.

Each administration of Oxervate requires the use of a vial containing the drug product, a vial adapter, a single-use pipette and disinfectant wipes.

To our knowledge, there are currently only two product candidates in active clinical development for the treatment of a broad PCED population.

KIO-201, a chemically modified form of the natural polymer hyaluronic acid administered as an eye drop, is currently being studied in a Phase 2 clinical trial in patients with PCED by Kiora

Pharmaceuticals, Inc.

Nexagon®, an antisense oligonucleotide that inhibits connexin43 being developed by Amber Ophthalmics, is currently being studied in a Phase 2/3 clinical trial in patients with PCED.

A number of companies are pursuing development of product candidates for the treatment of NK, including ReGenTree, LLC (Timbetasin) and Claris Biotherapeutics, Inc.

Competition in L imbal Stem Cell Deficiency

Competitive products and product candidates in LSCD include two stem cell-based approaches.

ABCB5+ limbal stem cells, which are being studied in Phase 1/2 clinical trials and are being developed by RHEACELL GmbH & Co.

KG, utilize allogeneic limbal stem cells derived from human corneal rims, which are expanded ex-vivo and manufactured as an advanced-therapy medicinal product.

Holoclar utilizes autologous limbal stem cells derived from the healthy portion of the patient’s eye.

Holoclar is approved in the European Union for treatment of LSCD caused by ocular burns and is developed by Chiesi.

Additionally, Claris Biotherapeutics, Inc.

has initiated a Phase 1 study in LSCD of its recombinant hepatocyte growth factor product candidate, CSB-001.

Sales and Marketing

We have not yet established our own commercial organization or distribution capabilities specific to KPI-012.

We believe that we will be able to commercialize KPI-012, if approved, for the treatment of PCED with a small, targeted, internal sales force in the United States and potentially other major markets.

We expect to explore commercialization of KPI-012, if approved, in certain markets outside the United States utilizing a variety of collaboration, distribution, co-promotion, distribution and other marketing arrangements with one or more third parties.

Manufacturing and Supply

We do not own or operate, and currently have no plans to establish, any manufacturing facilities for KPI-012.

We rely, and expect to continue to rely, on third parties for the manufacture of both drug substance and finished drug product for KPI-012 for preclinical and clinical testing, as well as for commercial manufacture of KPI-012 if it receives marketing approval.

We utilize our substantial in-house expertise and know-how to develop and scale-up our manufacturing processes before these processes are transferred to third-party contract manufacturers, and to understand and establish controls of critical process parameters.

We also have personnel with deep product development experience who actively manage the third-party contract manufacturers producing KPI-012 and plan to use such personnel to manage third-party contract manufacturers for any products that we may develop in the future.

We also rely, and expect to continue to rely, on third parties for packaging, labeling, sterilization, storage, distribution and other production logistics for KPI-012.

We have only limited supply agreements in place with respect to the manufacturing of KPI-012, and these arrangements do not extend to commercial supply.

We obtain supplies of drug substance and finished drug product for KPI-012 on a purchase order basis and do not have long term committed supply arrangements with respect to KPI-012.

Manufacturing biologics is complex, especially in large quantities.

Biologic products must be made consistently and in compliance with a clearly defined manufacturing process.

KPI-012 is a bone-marrow derived MSC-S therapeutic composed of biologically active components, including protease inhibitors and growth factors, and is produced from a proprietary cell bank.

The manufacturing process for KPI-012 is comprised of three stages:

(1) cultivation of MSCs from a working cell bank and production of unprocessed conditioned media (cell-free secretome), (2) production of drug substance as a chemically defined solution and (3) formulation and filling of drug product.

While the drug product for Combangio’s early research and Phase 1b clinical trial was cultivated using a planar culture model, we implemented a bioreactor cultivation model for our ongoing CHASE Phase 2b clinical trial of KPI-012.

We also plan to utilize a bioreactor cultivation model for our planned clinical trials and for commercial supply of KPI-012.

We are continuing the process of scaling up our manufacturing processes and capabilities with our third-party manufacturers to support longer term clinical development.

We do not currently have arrangements in place for redundant supply or a second source for bulk drug substance.

KPI-012 drug product is manufactured from a vial of a working cell bank, which in turn was produced from a vial of master cell bank.

KPI-012 master cell bank and working cell bank are stored in two separate locations.

It is possible that we could lose the cell bank in both locations and have our manufacturing severely impacted by the need to replace the cell bank.

We have not yet established a commercial organization or distribution capabilities.

With respect to our AI platform business, we intend to develop a direct sales capability targeting biotechnology and pharmaceutical companies, contract research organizations, and academic research institutions.

We intend to supplement our direct sales efforts with strategic partnerships and channel arrangements as the AI platform business matures.

With respect to any biologics product candidates that we may develop or acquire in the future, we would seek to establish appropriate sales and marketing capabilities at the time of any regulatory approval, either directly or through third-party arrangements.

Intellectual Property

Our success depends significantly on our ability to obtain and maintain proprietary protection for our products, product candidates, technology and knowhow, to operate without infringing the proprietary rights of others and to prevent others from infringing our proprietary rights.

Our success depends significantly on our ability to obtain and maintain proprietary protection for our products, product candidates, technology and know-how, to operate without infringing the proprietary rights of others and to prevent others from infringing our proprietary rights.

We seek to protect our proprietary position by, among other methods, filing U.S.

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As of March 13, 2026, we owned eight U.S.

issued patents and six U.S.

patent applications, as well as 41 foreign patent applications (including pending Patent Cooperation Treaty, or PCT, applications).

issued patents and seven U.S.

patent applications, as well as two foreign patents and 49 foreign patent applications (including pending Patent Cooperation Treaty, or PCT, applications).

We exclusively licensed one U.S.

patent application, as well as one foreign patent and one foreign patent application including original filings, continuations and divisional applications.

patent, as well as one foreign patent and one foreign patent application including original filings, continuations and divisional applications.

Our patent portfolio includes the following patents and patent applications that we own or exclusively license:

patents, six U.S.

patent applications, and 41 related foreign patent applications, all relating to pharmaceutical compositions including KPI-012 for treating ocular conditions, which are owned by us, and which, if granted with respect to the patent applications, and if the appropriate maintenance, renewal, annuity or other governmental fees are paid, are expected to expire beginning in 2040;

patent application, one foreign patent, and one foreign patent application, all related to secreted stem cell factors for tissue repairment and regeneration, and which are exclusively in-licensed from Stanford University, and which, if granted with respect to the patent applications, and if the appropriate maintenance, renewal, annuity or other governmental fees are paid, are expected to expire beginning in 2038;

patents, seven U.S.

patent applications, and two foreign patents and 49 related foreign patent applications, all relating to pharmaceutical compositions including KPI-012 for treating ocular conditions, which are owned by us, and which, if granted with respect to the patent applications, and if the appropriate maintenance, renewal, annuity or other governmental fees are paid, are expected to expire beginning in 2040;

patent, one foreign patent, and one foreign patent application, all related to secreted stem cell factors for tissue repairment and regeneration, and which are exclusively in-licensed from Stanford University, and which, if granted with respect to the patent applications, and if the appropriate maintenance, renewal, annuity or other governmental fees are paid, are expected to expire beginning in 2038;

The term of individual patents depends upon the legal term for patents in the countries in which they are granted.

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In the United States, a patent’s term may, in certain cases, be lengthened by patent term adjustment, which compensates a patentee for administrative delays by the U.S.

Patent and Trademark Office in examining and granting a patent, or may be shortened if a patent is terminally disclaimed over a commonly owned patent or a patent naming a common inventor and having an earlier expiration date.

Patent and Trademark Office in examining and granting a patent, or may be shortened if a patent is terminally

disclaimed over a commonly owned patent or a patent naming a common inventor and having an earlier expiration date.

The Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, permits a patent term extension of up to five years beyond the expiration date of a U.S.

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Licensing and Other Arrangements

EYSUVIS and INVELTYS Milestone Payments

We previously developed and commercialized two marketed products, EYSUVIS® (loteprednol etabonate ophthalmic suspension) 0.25% (“EYSUVIS”), for the short-term (up to 2 weeks) treatment of the signs and symptoms of dry eye disease, and INVELTYS® (loteprednol etabonate ophthalmic suspension) 1% (“INVELTYS”), a topical twice-a-day ocular steroid for the treatment of post-operative inflammation and pain following ocular surgery.

Both products applied a proprietary mucus-penetrating particle drug delivery technology (the “AMPPLIFY® Drug Delivery Technology”).

On July 8, 2022, we sold to Alcon Pharmaceuticals Ltd.

and Alcon Vision, LLC (together, “Alcon”), the rights to manufacture, sell, distribute, market and commercialize EYSUVIS and INVELTYS and to develop, manufacture, market and otherwise exploit the AMPPLIFY Drug Delivery Technology (collectively, the “Commercial Business”) pursuant to an asset purchase agreement (the “Alcon Asset Purchase Agreement”).

We are eligible to receive from Alcon up to four commercial-based sales milestone payments related to the aggregate worldwide net sales of EYSUVIS and INVELTYS in time frames ranging from 2023 to 2029.

Each milestone payment is payable once upon the first time such milestone is achieved, and only one milestone payment may be paid with respect to a calendar year.

To date, no milestones have been achieved, and we have not received any milestone payments from Alcon.

Stanford University License Agreement

As part of our acquisition of Combangio, we acquired Combangio’s exclusively in-licensed patent portfolio from Stanford University.

In October 2019, Combangio entered into a license agreement with The Board of Trustees of The Leland Stanford Junior University, or Stanford, which was amended in February 2020.

In October 2019, Combangio entered into a license agreement with The Board of Trustees of The Leland Stanford Junior University (“Stanford”), which was amended in February 2020 (as amended, the “Stanford Agreement”).

Pursuant to the license agreement with Stanford, or the Stanford Agreement, we hold a worldwide, exclusive, sublicensable license under certain patent rights, or licensed patents, directed to methods to promote eye wound healing, to make, have made, use, import, offer to sell and sell products that are covered by the licensed patents, or licensed products, for use in all fields.

Financial Terms

In consideration for that license, Combangio paid Stanford an upfront fee of $15,000.

Under the Stanford Agreement, we are obligated to pay Stanford annual license maintenance fees in the low-to-mid five figures which are creditable against earned royalties owed to Stanford for the same year, an aggregate of up to $1.1 million for the achievement of specified development and regulatory milestones, and an aggregate of up to $1.1 million for the achievement of specified sales milestones.

In 2023, we paid Stanford a $175,000 milestone payment which was triggered by the commencement of the CHASE trial in the United States.

Under the Stanford Agreement, we owe Stanford certain milestone payments upon the achievement of specified development and regulatory milestones and specified sales milestones, as well as certain fees and royalties.

A milestone payment to Stanford was triggered by the commencement of the CHASE trial in the United States.

Stanford is also entitled to receive tiered royalties from us in a low single digit percentage range of our, our affiliates’ and our sublicensees’ net sales of licensed products that are covered by a valid claim of a licensed patent.

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Additionally, we are required to pay Stanford a low double-digit percentage of certain consideration we receive as a result of granting sublicenses to the licensed patents.

In connection with our acquisition of Combangio, we paid Stanford a one-time change of control fee of $100,000.

Stanford retains the right, on behalf of itself, Stanford Health Care, Lucile Packard Children’s Hospital at Stanford, and all other non-profit research institutions, to practice the licensed patents for any non-profit purpose.

Pursuant to the Stanford Agreement, Stanford retains the right, on behalf of itself, Stanford Health Care, Lucile Packard Children’s Hospital at Stanford, and all other non-profit research institutions, to practice the licensed patents for any non-profit purpose.

In addition, the United States government retains nonexclusive rights under the licensed patents to practice or have practiced the licensed patents by or on behalf of the United States government or on behalf of any foreign government or international organization pursuant to treaty or agreement.

Diligence Obligations

Under the Stanford Agreement, we are obligated to diligently develop, manufacture and sell licensed product, diligently develop markets for licensed product, and use commercially reasonable efforts to achieve certain funding and development milestones by specified dates.

Term and Termination

Unless earlier terminated, our exclusive license under the Stanford Agreement will continue until the expiration of the licensed patents.

We may terminate the Stanford Agreement at any time for any reason by providing at least 30 days’ written notice to Stanford.

Stanford may terminate the agreement if we breach certain provisions of the agreement and fail to remedy such breach within 60 days after written notice of such breach by Stanford.

Combangio Merger Agreement

Pursuant to the Agreement and Plan of Merger, or the Merger Agreement, we entered into with Combangio in connection with the acquisition of Combangio in November 2021, the former Combangio stockholders or other equityholders, or the Combangio Equityholders, are entitled to receive from us up to $105.0 million in payments that are contingent upon the achievement of specified development, regulatory and commercialization milestones, or the Contingent Consideration.

Pursuant to the Agreement and Plan of Merger (the “Combangio Merger Agreement”), we entered into with Combangio in connection with the acquisition of Combangio in November 2021, the former Combangio stockholders or other equityholders (the “Combangio Equityholders”), are entitled to receive from us up to $105.0 million in payments that are contingent upon the achievement of specified development, regulatory and commercialization milestones (the “Contingent Consideration”)..

Upon dosing of the first patient in our CHASE trial for PCED in the United States in February 2023, we paid the former Combangio Equityholders an aggregate of $2.5 million in cash and $2.4 million in shares of our Common Stock (representing an aggregate of 105,038 shares of our Common Stock ) in March 2023.

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Any Carry Forward Contingent Cash Consideration outstanding on June 1, 2026 is payable in full on June 1, 2026.

Our development of KPI-012 is currently being funded, in part, by an award from the California Institute for Regenerative Medicine, or CIRM.

On August 2, 2023, Combangio entered into an award agreement with CIRM for a $15.0 million grant, or the CIRM Award, to support the KPI-012 program for the treatment of PCED as well as product and process characterization and analytical development for the program.

The CIRM Award is subject to a co-funding requirement under which Combangio is obligated to spend a specified minimum amount on the development of KPI-012 to obtain the full award amount and a significant portion of the award is payable to Combangio upon the achievement of specified milestones that are primarily related to Combangio’s progress in conducting the CHASE clinical trial.

Combangio received an initial $5.9 million disbursement from CIRM upon entry into the CIRM Award, and an aggregate of $5.8 million in disbursements from CIRM upon the achievement of specified milestones.

The balance of $3.3 million is payable to Combangio upon the achievement of other specified milestones.

If we fail to satisfy the co-funding requirement under the CIRM Award or fail to achieve the milestones within the timeframe required by the CIRM Award, we may not receive full funding under the CIRM Award.

Our development of KPI-012 was funded, in part, by an award from the California Institute for Regenerative Medicine (“CIRM”).

On August 2, 2023, Combangio entered into an award agreement with CIRM for a $15.0 million grant (the “CIRM Award”), to support the KPI-012 program for the treatment of PCED as well as product and process characterization and analytical development for the program.

The CIRM Award was subject to a co-funding requirement to spend a specified minimum amount on the development of KPI-012 to obtain the full award amount, with a significant portion of the award is payable upon the achievement of specified milestones that are primarily related to the progress in conducting the CHASE clinical trial.

Additionally, there were significant compliance requirements associated with the CIRM Award, such as reporting, notification, recordkeeping and audit requirements, for which internal and external resources may be needed and which may increase our costs of doing business.

Under the CIRM Award, if we fail to satisfy the co-funding requirement under the CIRM Award or fail to achieve the milestones within the timeframe required by the CIRM Award, we may not receive full funding under the CIRM Award.

CIRM may permanently cease disbursements under the CIRM Award if the milestones are not met within four months of their scheduled completion dates or if the delay is not addressed to CIRM’s satisfaction, as determined by CIRM in its sole discretion.

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Moreover, disbursements under the CIRM Award are contingent upon the availability of funds in the state of California’s Stem Cell Research and Cures Fund, which is outside of our control.

The CIRM Award also imposes financial conditions that may increase the costs of commercializing KPI-012, if approved.

Under the terms of the CIRM Award, Combangio is obligated to pay a royalty on net sales of any product, service or approved drug resulting in whole or in part from the CIRM Award in the amount of 0.1% per $1.0 million of funds utilized by us until the earlier of 10 years from the date of first commercial sale of such product, service or approved drug and such time as nine times the amount of funds awarded by CIRM has been paid in royalties, or the Base Royalty.

In addition, following the satisfaction of the Base Royalty, Combangio is obligated to pay a 1.0% royalty on net sales of any CIRM-funded invention in excess of $500 million per year until the last to expire patent covering such invention expires.

Additionally, there are significant compliance requirements associated with the CIRM Award, such as reporting, notification, recordkeeping and audit requirements, for which internal and external resources may be needed and which may increase our costs of doing business.

Securities Purchase Agreements for Private Placements

Series E Private Placement

On November 28, 2022, we entered into a Securities Purchase Agreement, or the 2022 Securities Purchase Agreement, with certain institutional investors named therein, or the Series E Purchasers, pursuant to which we issued and sold, in a private placement priced at-the-market under Nasdaq rules, shares of our common stock and shares of our Series E Convertible Non-Redeemable Preferred Stock, or Series E Preferred Stock, in two tranches for aggregate gross proceeds of up to $31.0 million, which we refer to collectively as the Series E Private Placement.

Pursuant to the 2022 Securities Purchase Agreement, if at any time during the four-year period following the date of the first tranche closing, or the Participation Period, we propose to offer and sell new equity securities in an offering that is conducted pursuant to an exemption from registration under the Securities Act of 1933, as amended, or the Securities Act, or in an offering that is registered under the Securities Act that is not conducted as a firm-commitment underwritten offering, then, subject to compliance with securities laws and regulations, we have agreed to offer each Purchaser the right to purchase its pro rata share of the total amount of the new equity securities, subject to certain conditions and limitations.

In addition, if during the Participation Period, we propose to offer and sell new equity securities in a firm-commitment underwritten offering registered under the Securities Act, then subject to compliance with securities laws and regulations, we have agreed to use our commercially reasonable efforts to cause the managing underwriters of such offering to contact the Purchasers about potentially participating in such offering and to provide to each Purchaser the opportunity to purchase its pro rata share of such new equity securities, subject to certain conditions and limitations.

The participation rights will terminate if the Purchasers are offered the opportunity to participate in an offering pursuant to the participation rights and do not purchase at least 50% of their aggregate pro rata share of the new equity securities offered for sale in such offering.

Pursuant to the 2022 Securities Purchase Agreement, the Series E Purchasers have the right to have up to two non-voting observers attend and participate in all of our board of directors, or the Board, and committee meetings and, subject to the Series E Purchasers owning directly specified minimum amounts of our common stock, the right to have the Board nominate and recommend for election by the stockholders up to three Series E Purchaser designees to the Board (one designee at 9.9%, two designees at 15.0% and three designees at 25.0%) designated by the Series E Purchasers, provided that at such time as the Series E Purchasers have designated three Board designees, at least one such designee must qualify as an “independent” director under Nasdaq rules and be acceptable to the members of the Board who are not Series E Purchaser designees.

The Series E Purchasers’ observer rights and Board designation rights will terminate at such time as the Series E Purchasers and their affiliates cease to own, in the aggregate, specified minimum amounts of the shares purchased in the Series E Private Placement.

Pursuant to the 2022 Securities Purchase Agreement, we agreed that we will not without the prior approval of the requisite Series E Purchasers (i) issue or authorize the issuance of any equity security that is senior or pari passu to the Series E Preferred Stock with respect to liquidation preference, (ii) incur any additional indebtedness for borrowed money in excess of $1,000,000, in the aggregate, outside the ordinary course of business, subject to specified exceptions, including the refinancing of our existing indebtedness or (iii) pay or declare any dividend or make any distribution on,

any shares of our capital stock, subject to specified exceptions.

We have filed a registration statement covering the resale of the shares of common stock acquired in the Series E Private Placement and the shares of common stock issuable upon conversion of the shares of Series E Preferred Stock acquired in the Series E Private Placement.

Series F Private Placement

On December 21, 2023, we entered into a Securities Purchase Agreement, or the 2023 Securities Purchase Agreement, with certain institutional investors named therein, or the Series F Purchasers, pursuant to which we issued and sold, in a private placement priced at-the-market under Nasdaq rules, or the Series F Private Placement, shares of our Series F Convertible Non-Redeemable Preferred Stock, or Series F Preferred Stock, for aggregate gross proceeds of approximately $2.0 million.

We agreed that we will not without the prior approval of the requisite Series F Purchasers (i) issue or authorize the issuance of any equity security that is senior or pari passu to the Series F Preferred Stock with respect to liquidation preference, (ii) incur any additional indebtedness for borrowed money in excess of $1,000,000, in the aggregate, outside the ordinary course of business, subject to specified exceptions, including the refinancing of our existing indebtedness or (iii) pay or declare any dividend or make any distribution on, any shares of our capital stock, subject to specified exceptions.

We have filed a registration statement covering the resale of the shares of common stock issuable upon conversion of the shares of Series F Preferred Stock acquired in the Series F Private Placement.

Series G Private Placement

On March 25, 2024, we entered into a Securities Purchase Agreement, or the March 2024 Securities Purchase Agreement, with certain institutional investors named therein, or the Series G Purchasers, pursuant to which we issued and sold, in a private placement priced at-the-market under Nasdaq rules, or the Series G Private Placement, shares of our Series G Convertible Non-Redeemable Preferred Stock, or Series G Preferred Stock, for aggregate gross proceeds of approximately $8.6 million.

We agreed that we will not without the prior approval of the requisite Series G Purchasers (i) issue or authorize the issuance of any equity security that is senior or pari passu to the Series G Preferred Stock with respect to liquidation preference, (ii) incur any additional indebtedness for borrowed money in excess of $1,000,000, in the aggregate, outside the ordinary course of business, subject to specified exceptions, including the refinancing of our existing indebtedness or (iii) pay or declare any dividend or make any distribution on, any shares of our capital stock, subject to specified exceptions.

We have filed a registration statement covering the resale of the shares of common stock issuable upon conversion of the shares of Series G Preferred Stock acquired in the Series G Private Placement.

Series H Private Placement

On June 26, 2024, we entered into a Securities Purchase Agreement, or the June 2024 Securities Purchase Agreement, with certain institutional investors named therein, or the Series H Purchasers, pursuant to which we issued and sold, in a private placement, or the Series H Private Placement, shares of our common stock and shares of our Series H Convertible Non-Redeemable Preferred Stock, or Series H Preferred Stock, for aggregate gross proceeds of approximately $12.5 million.

We agreed that we will not, without the prior approval of the requisite Series H Purchasers, issue or authorize the issuance of any equity security that is senior or pari passu to the Series H Preferred Stock with respect to liquidation preference.

We have filed a registration statement covering the resale of the shares of common stock acquired in the Series H Private Placement and the shares of common stock issuable upon conversion of the shares of Series H Preferred Stock acquired in the Series H Private Placement.

Series I Private Placement

On December 29, 2024, we entered into a Securities Purchase Agreement, or the December 2024 Securities Purchase Agreement, with certain institutional investors named therein, or the Series I Purchasers, pursuant to which we agreed to issue and sell, in a private placement, or the Series I Private Placement, shares of our common stock and shares of our Series I Convertible Non-Redeemable Preferred Stock, or the Series I Preferred Stock, for aggregate gross proceeds of approximately $10.8 million.

We agreed that we will not, without the prior approval of the requisite Series I Purchasers, issue or authorize the issuance of any equity security that is senior or pari passu to the Series I Preferred Stock with respect to liquidation preference.

We have filed a registration statement covering the resale of the shares of common stock acquired in the Series I Private Placement and the shares of common stock issuable upon conversion of the shares of Series I Preferred Stock acquired in the Series I Private Placement.

Government Regulation and Product Approvals

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

The processes for obtaining marketing approvals in the United States and in foreign countries and jurisdictions, along with compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources and may have a substantial impact on our business.

On September 29, 2025, we announced that the CHASE trial of KPI-012 for the treatment of PCED did not meet the primary endpoint of complete healing of PCED as measured by corneal fluorescein staining.

The CHASE trial also failed to achieve statistical significance for key secondary efficacy endpoints and did not show any meaningful difference between either KPI-012 treatment arm and the placebo arm.

Based on the CHASE trial results, we determined to cease development of KPI-012 and our MSC-S platform.

As of December 31, 2025, no more funding is expected under the CIRM Award.

Government Regulation

Our business is subject to an evolving regulatory landscape.

Although we do not currently believe Researgency constitutes a medical device, customer use of AI-generated analyses to inform drug discovery, clinical trial design, or regulatory submissions may implicate FDA expectations for credibility, reproducibility and explainability of analyses used in regulated activities the scope of which remains uncertain.

In addition, deployment within customer environments may involve personal data subject to U.S.

federal and state privacy laws (including HIPAA and the CCPA/CPRA) and foreign privacy regimes (including the GDPR), as well as emerging U.S.

federal and state AI-specific statutes and regulations, each of which is subject to ongoing interpretation and enforcement priorities that may change over time.

In addition, our existing clinical trial data and IP, and any future clinical trial development is governed by government authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions, including the European Union, extensively regulate, among other things, the research, development, testing, manufacture, pricing, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, reimbursement and import and export of biopharmaceutical products and certain artificial intelligence and machine learning platforms intended for use in life sciences.

Government Regulation of Artificial Intelligence in Life Sciences

In connection with our strategic decision to prioritize our Researgency business through the Researgency License, we are subject to a rapidly evolving regulatory environment governing the use of artificial intelligence and machine learning in life sciences applications.

Although we do not believe Researgency would be considered a medical device, it is expected to be designed for deployment within biotechnology and pharmaceutical client environments to process proprietary biological data and clinical trial datasets, and its outputs may be used to inform or support drug discovery, clinical trial design, and regulatory submissions by our customers.

As a result, both the platform itself and its use cases may implicate a range of existing and emerging regulatory frameworks.

The FDA has issued guidance on the use of artificial intelligence and machine learning in drug development and in medical devices, including a framework for AI/ML-based software as a medical device (SaMD).

Although we do not currently believe that our AI platform constitutes a medical device or SaMD, the FDA's regulatory framework in this area is evolving, and future guidance or rulemaking could expand the scope of FDA oversight to encompass AI platforms used in connection with drug discovery or clinical development activities.

In October 2023, the FDA issued a discussion paper on the use of AI in drug manufacturing, and in March 2024, the FDA published a draft guidance on the use of AI and machine learning in the development of drug and biological products.

These and other regulatory initiatives may impose requirements on AI platforms that are used to generate outputs in support of regulatory submissions, clinical trial design, or other activities subject to FDA, or similar state or foreign regulatory authority, oversight.

In addition, because Researgency is designed for on-premises deployment within client environments and may process proprietary biological data, clinical trial datasets, and other sensitive information of our biotechnology and pharmaceutical customers, the platform may be subject to data privacy and security requirements, including obligations that may arise under HIPAA, the GDPR, the CCPA, and other applicable federal, state, and international privacy laws that govern the handling of protected health information and other sensitive personal data.

The regulatory landscape for data privacy is rapidly evolving, with numerous states having enacted or considering consumer data privacy statutes.

We may also be subject to emerging state and federal legislation specifically governing the use of artificial intelligence, including requirements related to algorithmic transparency, bias testing, and disclosure obligations.

The regulatory landscape for AI products is rapidly evolving in the United States and internationally, including through the EU Artificial Intelligence Act which establishes a risk-based governance framework for AI in the EU market, and there is significant uncertainty regarding the nature and scope of future AI-related regulation.

Furthermore, our customers' use of outputs generated by Researgency in their own regulatory submissions, clinical trial protocols, or product development activities may subject those outputs to scrutiny by the FDA and other regulatory authorities.

To the extent the FDA or other regulators require that AI-generated analyses or recommendations used in regulatory submissions meet specific standards of credibility, reproducibility, or explainability, our platform may need to be designed and validated to satisfy those standards.

If we are unable to meet such requirements, or if the regulatory environment develops in a manner that restricts the use of AI-generated outputs in drug development, our ability to commercialize the AI platform and generate revenue from our target customers could be adversely affected.

We intend to monitor regulatory developments and adapt our platform capabilities as appropriate, but there can be no assurance that we will be able to anticipate or respond to all applicable requirements in a timely or cost-effective manner..

Our AI platform may incorporate or rely upon third-party LLMs or other machine learning technologies.

LLMs process large amounts of data, including potentially sensitive customer information.

Unauthorized access to or a breach of LLM software or related systems could lead to significant legal and financial repercussions.

LLMs may produce incorrect, inaccurate or misleading outcomes, sometimes referred to as “hallucinations,” and the ongoing accuracy and reliability of AI-generated outputs is critical for the effectiveness of our platform.

Inaccurate or unreliable outputs could lead to customer dissatisfaction, reputational harm, reduced demand for our platform and potential legal liabilities.

Furthermore, rapid advancements in AI technology could render our existing LLM-powered tools obsolete, requiring the licensing or development of replacement technologies at significant cost.

LLMs and other AI models are typically trained on large datasets that may contain biases, and these biases can be reflected in the output of AI systems, potentially leading to ethical concerns, reputational harm, unfair or discriminatory outcomes, and potential liability.

There may also be real or perceived social harm or other outcomes that undermine public confidence in the use and deployment of AI technologies.

Any of the foregoing may result in decreased demand for our platform, harm to our reputation, regulatory scrutiny or legal action.

Our platform involves the collection, storage and transmission of confidential and proprietary information belonging to our customers, including personal identifying information, clinical trial data and other sensitive business data.

Our systems may be targeted in cyber-attacks, including computer viruses, phishing attacks, malicious software programs, distributed denial of service attacks and other information security breaches, which could result in unauthorized access to, or release, monitoring, misuse, loss or destruction of, sensitive data.

If threat actors are able to circumvent our security measures, sensitive data may be compromised.

Because the techniques used to obtain unauthorized access or to sabotage systems change frequently and may utilize advanced technologies including AI, we

may not be able to anticipate these techniques and implement adequate preventative or protective measures.

Any actual or perceived breach of our security could damage our reputation, cause existing customers to discontinue the use of our platform, prevent us from attracting new customers, or subject us to third-party lawsuits, regulatory investigations, fines or other actions or liabilities.

Government Regulation of Biological Products

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A company, institution, or organization which takes responsibility for the initiation and management of a clinical development program for such products, and for their regulatory approval, is typically referred to as a sponsor.

Although the Company has suspended active clinical development of KPI-012 and its MSC-S platform following the results of the CHASE Phase 2b clinical trial, the Company retains its biologics intellectual property portfolio, including its existing IND, and continues to evaluate opportunities to resume preclinical and clinical development activities, subject to the availability of additional financing and the identification of a suitable development partner.

Accordingly, the regulatory framework governing biological products remains relevant to the Company's business.

A sponsor seeking approval to market and distribute a new biologic in the United States must satisfactorily complete each of the following steps:

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● compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy, or REMS, and any post-approval studies required by the FDA.

Preclinical Studies

Before a sponsor begins testing a product candidate with potential therapeutic value in humans, the product candidate enters the preclinical testing stage.

Preclinical tests include laboratory evaluations of product chemistry, formulation and stability, as well as other studies to evaluate, among other things, the toxicity of the product candidate.

These studies are typically referred to as IND-enabling studies.

The conduct of the preclinical tests and formulation of the compounds for testing must comply with federal regulations and requirements, including GLP regulations and standards and the United States Department of Agriculture’s Animal Welfare Act, if applicable.

The results of the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND.

Some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, and long-term toxicity studies, may continue after the IND is submitted.

With passage of the FDA’s Modernization Act 2.0 in December 2022, Congress eliminated provisions in both the FDCA and the Public Health Service Act, or PHSA, that required animal testing in support of a BLA.

While animal testing may still be conducted, the FDA was authorized to rely on alternative non-clinical tests, including cell-based assays, microphysiological systems or bioprinted or computer models.

The IND and IRB Processes

An IND is an exemption from the FDCA that allows an unapproved product candidate to be shipped in interstate commerce for use in an investigational clinical trial and a request for FDA authorization to administer such investigational product to humans.

Such authorization must be secured prior to interstate shipment and administration of any product candidate that is not the subject of an approved BLA.

In addition to reviewing an IND to ensure the safety and rights of patients, the FDA also focuses on the quality of the investigation and whether it will be adequate to permit an evaluation of the drug’s safety, potency and purity.

In support of a request for an IND, sponsors must submit a protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND.

In addition, the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among other things, must be submitted to the FDA as part of an IND.

The FDA requires a 30-day waiting period after the filing of each IND before clinical trials may begin.

This waiting period is designed to allow the FDA to review the IND to determine whether human research subjects will be exposed to unreasonable health risks.

At any time during this 30-day period, the FDA may raise concerns or questions about the conduct of the trials as outlined in the IND and impose a clinical hold or partial clinical hold.

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

Following commencement of a clinical trial under an IND, the FDA may also place a clinical hold or partial clinical hold on that trial.

A clinical hold is an order issued by the FDA to the sponsor to delay a proposed clinical trial or to suspend an ongoing trial.

A partial clinical hold is a delay or suspension of only part of the clinical work requested under the IND.

For example, a specific protocol or part of a protocol is not allowed to proceed, while other protocols may do so.

No more than 30 days after imposition of a clinical hold or partial clinical hold, the FDA will provide the sponsor a written explanation of the basis for the hold.

Following issuance of a clinical hold or partial clinical hold, an investigation may only resume after the FDA has notified the sponsor that the investigation may proceed.

The FDA will base that determination on information provided by the sponsor correcting the deficiencies previously cited or otherwise satisfying the FDA that the investigation can proceed.

Additionally, some trials are overseen by an independent group of qualified experts organized by the trial sponsor, known as a data monitoring committee.

This group regularly reviews accumulated data and advises the study sponsor regarding the continuing safety of the trial.

The DMC receives special access to unblinded data during the clinical trial and may advise the sponsor to halt the clinical trial if it determined there is an unacceptable safety risk for subjects or on other grounds, such as no demonstration of efficacy.

Reporting Clinical Trial Results

Under the PHSA, sponsors of clinical trials of certain FDA-regulated products, including biologics, are required to register and disclose certain clinical trial information on a public registry (clinicaltrials.gov) maintained by the U.S.

National Institutes of Health, or NIH.

In particular, information related to the product, patient population, phase of investigation, study sites and investigators and other aspects of the clinical trial is made public as part of the registration of the clinical trial.

Although sponsors are also obligated to disclose the results of their clinical trials after completion,

disclosure of the results can be delayed in some cases for up to two years after the date of completion of the trial.

The NIH’s final rule on registration and reporting requirements for clinical trials became effective in 2017.

The PHSA grants the Secretary of Health and Human Services the authority to issue a notice of noncompliance to a responsible party to failure to submit clinical trial information as required.

The responsible party, however, is allowed 30 days to correct the noncompliance and submit the required information.

As of December 19, 2024, the FDA has issued six notices of non-compliance, signaling the government’s willingness to enforce these requirements against non-compliant clinical trial sponsors.

While these notices of non-compliance did not result in civil monetary penalties, the failure to submit clinical trial information to clinicaltrials.gov, as required, is a prohibited act under the FDCA with violations subject to potential civil monetary penalties of up to $10,000 for each day the violation continues.

Expanded Access to an Investigational Drug for Treatment Use

Expanded access, sometimes called “compassionate use,” is the use of investigational new drug products outside of clinical trials to treat patients with serious or immediately life-threatening diseases or conditions when there are no comparable or satisfactory alternative treatment options.

The rules and regulations related to expanded access are intended to improve access to investigational drugs for patients who may benefit from investigational therapies.

FDA regulations allow access to investigational drugs under an IND by the company or the treating physician for treatment purposes on a case-by-case basis for:

individual patients (single-patient IND applications for treatment in emergency settings and non-emergency settings);

intermediate-size patient populations;

and larger populations for use of the drug under a treatment protocol or Treatment IND Application.

When considering an IND application for expanded access to an investigational product with the purpose of treating a patient or a group of patients, the sponsor and treating physicians or investigators will determine suitability when all of the following criteria apply:

patient(s) have a serious or immediately life-threatening disease or condition, and there is no comparable or satisfactory alternative therapy to diagnose, monitor, or treat the disease or condition;

the potential patient benefit justifies the potential risks of the treatment and the potential risks are not unreasonable in the context or condition to be treated;

and the expanded use of the investigational drug for the requested treatment will not interfere initiation, conduct, or completion of clinical investigations that could support marketing approval of the product or otherwise compromise the potential development of the product.

There is no obligation for a sponsor to make its investigational products available for expanded access.

Sponsors are required, however, to make their expanded access policies publicly available upon the earlier of initiation of a Phase 2 or Phase 3 study;

or 15 days after the drug or biologic receives designation as a breakthrough therapy, fast track product, or regenerative medicine advanced therapy.

In addition, 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 drug manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act, but the manufacturer must develop an internal policy and respond to patient requests according to that policy.

Human Clinical Trials in Support of a BLA

Clinical trials involve the administration of the investigational product candidate to human subjects under the supervision of a qualified investigator in accordance with GCP requirements which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical trial.

Clinical trials are conducted under written clinical trial protocols detailing, among other things, the objectives of the study, inclusion and exclusion criteria, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated.

Human clinical trials are typically conducted in three sequential phases, but the phases may overlap or be combined.

Additional studies may also be required after approval.

Phase 1 clinical trials are initially conducted in a limited population to test the product candidate for safety, including adverse effects, dose tolerance, absorption, metabolism, distribution, excretion and pharmacodynamics in healthy humans or in patients.

During Phase 1 clinical trials, information about the investigational product’s pharmacokinetics and pharmacological effects may be obtained to permit the design of well-controlled and scientifically valid Phase 2 clinical trials.

Phase 2 clinical trials are generally conducted in a limited patient population to identify possible adverse effects and safety risks, evaluate the potency and purity of the product candidate for specific targeted indications and determine dose tolerance and optimal dosage.

Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain information prior to beginning larger and more costly Phase 3 clinical trials.

Phase 2 clinical trials are well controlled, closely monitored and conducted in a limited patient population.

Phase 3 clinical trials proceed if the Phase 2 clinical trials demonstrate that a dose range of the product candidate is potentially effective and has an acceptable safety profile.

Phase 3 clinical trials are undertaken within an expanded patient population to further evaluate dosage, provide substantial evidence of clinical efficacy and further test for safety in an expanded and diverse patient population at multiple, geographically dispersed clinical trial sites.

A well-controlled, statistically robust Phase 3 clinical trial may be designed to deliver the data that regulatory authorities will use to decide whether or not to approve, and, if approved, how to appropriately label a drug or biologic:

such Phase 3 studies are referred to as “pivotal.” A company’s designation of the phase of a trial is not necessarily indicative that the trial will be sufficient to satisfy the FDA requirements of that phase.

In some cases, the FDA may approve a BLA for a product candidate but require the sponsor to conduct additional clinical trials to further assess the product candidate’s safety and effectiveness after approval.

Such post-approval trials are typically referred to as Phase 4 clinical trials.

These studies are used to gain additional experience from the treatment of a larger number of patients in the intended treatment group and to further document a clinical benefit in the case of products approved under accelerated approval regulations.

Failure to exhibit due diligence with regard to conducting Phase 4 clinical trials could result in withdrawal of approval for products.

In December 2022, with the passage of Food and Drug Omnibus Reform Act, or FDORA, Congress required sponsors to develop and submit a diversity action plan for each phase 3 clinical trial or any other “pivotal study” of a new drug or biological product.

These plans are meant to encourage the enrollment of more diverse patient populations in late-stage clinical trials of FDA-regulated products.

Specifically, actions plans must include the sponsor’s goals for enrollment, the underlying rationale for those goals, and an explanation of how the sponsor intends to meet them.

In addition to these requirements, the legislation directs the FDA to issue new guidance on diversity action plans.

In June 2024, as mandated by FDORA, the FDA issued draft guidance outlining the general requirements for diversity action plans.

Unlike most guidance documents issued by the FDA, the diversity action plan guidance when finalized will have the force of law because FDORA specifically dictates that the form and manner for submission of diversity action plans are specified in FDA guidance.

In June 2023, the FDA issued draft guidance with updated recommendations for GCPs aimed at modernizing the design and conduct of clinical trials.

The updates are intended to help pave the way for more efficient clinical trials to facilitate the development of medical products.

The draft guidance is adopted from the International Council for Harmonisation’s recently updated E6(R3) draft guideline that was developed to enable the incorporation of rapidly developing technological and methodological innovations into the clinical trial enterprise.

In addition, the FDA issued draft guidance outlining recommendations for the implementation of decentralized clinical trials.

Interactions with FDA During the Clinical Development Program

Following the clearance of an IND and the commencement of clinical trials, the sponsor will continue to have interactions with the FDA.

A development safety and update report detailing the results of clinical trials must be submitted annually to the FDA within 60 days of the anniversary date that the IND went into effect and more frequently if serious adverse events occur.

In addition, IND safety reports must be submitted to the FDA for any of the following:

serious and unexpected suspected adverse reactions;

findings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the product;

and any clinically important increase in the case of a serious suspected adverse reaction over that listed in the protocol or investigator brochure.

Phase 1, Phase 2 and Phase 3 clinical

trials may not be completed successfully within any specified period, or completed at all.

The FDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted.

In addition, sponsors are given opportunities to meet with the FDA at certain points in the clinical development program.

There are five types of meetings that occur between sponsors and the FDA.

Type A meetings are those that are necessary for an otherwise stalled product development program to proceed or to address an important safety issue.

Type B meetings include meetings prior to the submission of an IND and meetings prior to the submission of a BLA, as well as end of phase meetings such as end of Phase 2 meetings.

A Type C meeting is any meeting other than a Type A or Type B meeting regarding the development and review of a product, including for example, meetings to facilitate early consultations on the use of a biomarker as a new surrogate endpoint that has never been previously used as the primary basis for product approval in the proposed context of use.

A type D meeting is focused on a narrow set of issues (typically limited to no more than two focused topics) and should not require input from more than three disciplines or divisions.

Finally, INTERACT meetings are intended for novel products and development programs that present unique challenges in the early development of an investigational product.

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

At the conclusion of these meetings, the FDA will typically provide its responses to questions posed by the sponsor regarding the clinical development program.

The FDA will not indicate whether a BLA will be approved, but it will provide guidance to the sponsor on various questions, including whether an application should be submitted in the first place on the basis of the studies and data proposed by the sponsor.

The FDA may also generally express support for the sponsor’s approach in the clinical development program but indicate that questions concerning whether the data support approval will be subject to review by the FDA following its acceptance for filing of the BLA.

The FDA has indicated that its responses, as conveyed in meeting minutes and advice letters, only constitute mere recommendations and/or advice made to a sponsor and, as such, sponsors are not bound by such recommendations and/or advice.

Nonetheless, from a practical perspective, a sponsor’s failure to follow the FDA’s recommendations for design of a clinical program may put the program at significant risk of failure.

In September 2023, the FDA issued draft guidance outlining the terms of such meetings in more detail.

Clinical Trials Outside the United States in Support of FDA Approval

In connection with our clinical development program, we may have trial sites outside the United States.

When a foreign clinical study is conducted under an IND, all IND requirements must be met unless waived.

When a foreign clinical study is not conducted under an IND, the sponsor must ensure that the study complies with certain regulatory requirements of the FDA in order to use the study as support for an IND or application for marketing approval.

Specifically, the studies must be conducted in accordance with GCP, including undergoing review and receiving approval by an independent ethics committee and seeking and receiving informed consent from subjects.

GCP requirements encompass both ethical and data integrity standards for clinical studies.

The FDA’s regulations are intended to help ensure the protection of human subjects enrolled in non-IND foreign clinical studies, as well as the quality and integrity of the resulting data.

They further help ensure that non-IND foreign studies are conducted in a manner comparable to that required for IND studies.

The acceptance by the FDA of study data from clinical trials conducted outside the United States in support of U.S.

approval may be subject to certain conditions or may not be accepted at all.

In cases where data from foreign clinical trials are intended to serve as the sole basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of foreign data alone unless (i) the data are applicable to the U.S.

population and U.S.

medical practice;

(ii) the trials were performed by clinical investigators of recognized competence and pursuant to GCP regulations;

and (iii) the data may be considered valid without the need for an on-site inspection by the FDA, or if the FDA considers such inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means.

Where the foreign study data are not intended to serve as the sole basis for approval, the FDA will not accept the data as support for an application for marketing approval unless the study is well-designed and well-conducted in accordance with GCP requirements and the FDA is able to validate the data from the study through an onsite inspection if deemed necessary.

Many foreign regulatory authorities have similar approval requirements.

In addition, such foreign trials are subject to the applicable local laws of the foreign jurisdictions where the trials are conducted.

Manufacturing and Other Regulatory Requirements

Concurrent with clinical trials, sponsors usually complete additional animal safety studies, develop additional information about the chemistry and physical characteristics of the product candidate and finalize a process for manufacturing commercial quantities of the product candidate in accordance with cGMP requirements.

The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other criteria, the sponsor must develop methods for testing the identity, strength, quality, and purity of the finished 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.

Specifically, the FDA’s regulations require that pharmaceutical products be manufactured in specific approved facilities and in accordance with cGMPs.

The cGMP regulations include requirements relating to organization of personnel, buildings and facilities, equipment, control of components and product containers and closures, production and process controls, packaging and labeling controls, holding and distribution, laboratory controls, records and reports and returned or salvaged products.

Manufacturers and other entities involved in the manufacture and distribution of approved pharmaceuticals are required to register their establishments with the FDA and some state agencies.

The PREVENT Pandemics Act, which was enacted in December 2022, clarifies that foreign drug manufacturing establishments are subject to registration and listing requirements even if a drug or biologic undergoes further manufacture, preparation, propagation, compounding or processing at a separate establishment outside the United States prior to being imported or offered for import into the United States.

Manufacturing facilities are subject to periodic unannounced inspections by the FDA for compliance with cGMPs and other requirements.

Inspections must follow a “risk-based schedule” that may result in certain establishments being inspected more frequently.

Manufacturers may also have to provide, on request, electronic or physical records regarding their establishments.

Delaying, denying, limiting, or refusing inspection by the FDA may lead to a product being deemed to be adulterated.

Changes to the manufacturing process, specifications or container closure system for an approved product are strictly regulated and often require prior FDA approval before being implemented.

The FDA’s regulations also require, among other things, the investigation and correction of any deviations from cGMP and the imposition of reporting and documentation requirements upon the sponsor and any third-party manufacturers involved in producing the approved product.

Pediatric Studies

Under the Pediatric Research Equity Act of 2003, or PREA, an application or supplement thereto must contain data that are adequate to assess the safety and effectiveness of the product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective.

Sponsors must also submit pediatric study plans prior to the assessment data.

Those plans must contain an outline of the proposed pediatric study or studies the sponsor plans to conduct, including study objectives and design, any deferral or waiver requests and other information required by regulation.

The sponsor, the FDA, and the FDA’s internal review committee must then review the information submitted, consult with each other and agree upon a final plan.

The FDA or the sponsor may request an amendment to the plan at any time.

The FDA may, on its own initiative or at the request of the sponsor, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements.

A deferral may be granted for several reasons, including a finding that the product or therapeutic candidate is ready for approval for use in adults before pediatric trials are complete or that additional safety or effectiveness data needs to be collected before the pediatric trials begin.

The law requires the FDA to send a PREA Non-Compliance letter to sponsors who have failed to submit their pediatric assessments required under PREA, have failed to seek or obtain a deferral or deferral extension or have failed to request approval for a required pediatric formulation.

It further requires the FDA to publicly post the PREA Non-Compliance letter and sponsor’s response.

Unless otherwise required by regulation, the pediatric data requirements do not apply to products with orphan designation, although FDA has taken steps to limit what it considers abuse of this statutory exemption in PREA by announcing that it does not intend to grant any additional orphan drug designations for rare pediatric subpopulations of what is otherwise a common disease.

The FDA also maintains a list of diseases that are exempt from PREA

requirements due to low prevalence of disease in the pediatric population.

In May 2023, the FDA issued new draft guidance that further describes the pediatric study requirements under the PREA.

Expedited Review Programs

The FDA is authorized to expedite the review of applications in several ways.

None of these expedited programs, however, changes the standards for approval but they may help expedite the development or approval process of product candidates.

● Fast Track designation :

Product candidates are eligible for Fast Track designation if they are intended to treat a serious or life-threatening condition and demonstrate the potential to address unmet medical needs for the condition.

Fast Track designation applies to the combination of the product candidate and the specific indication for which it is being studied.

In addition to other benefits, such as the ability to have greater interactions with the FDA, the FDA may initiate review of sections of a Fast Track application before the application is complete, a process known as rolling review.

● Breakthrough therapy designation.

To qualify for the breakthrough therapy program, product candidates must be intended to treat a serious or life-threatening disease or condition and preliminary clinical evidence must indicate that such product candidates may demonstrate substantial improvement on one or more clinically significant endpoints over existing therapies.

The FDA will seek to ensure the sponsor of a breakthrough therapy product candidate receives intensive guidance on an efficient development program, intensive involvement of senior managers and experienced staff on a proactive, collaborative and cross-disciplinary review and rolling review.

● Priority review.

A product candidate is eligible for priority review if it treats a serious condition and, if approved, it would be a significant improvement in the safety or effectiveness of the treatment, diagnosis or prevention compared to marketed products.

FDA aims to complete its review of priority review applications within six months as opposed to 10 months for standard review.

● Accelerated approval.

Drug or biologic products studied for their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated approval.

Accelerated approval means that a product candidate may be approved on the basis of adequate and well controlled clinical trials establishing that the product candidate has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an effect on a clinical endpoint other than survival or irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity and prevalence of the condition and the availability or lack of alternative treatments.

As a condition of approval, the FDA may require that a sponsor of a drug or biologic product candidate receiving accelerated approval perform adequate and well controlled post-marketing clinical trials.

In addition, the FDA currently requires as a condition for accelerated approval pre-approval of promotional materials.

With the passage of FDORA in December 2022, Congress modified certain provisions governing accelerated approval of drug and biologic products.

Specifically, the new legislation authorized the FDA to:

require a sponsor to have its confirmatory clinical trial underway before accelerated approval is awarded and require a sponsor of a product granted accelerated approval to submit progress reports on its post-approval studies to FDA every six months (until the study is completed).

Moreover, FDORA established expedited procedures authorizing the FDA to withdraw an accelerated approval if certain conditions are met, including where a required confirmatory study fails to verify and describe the predicted clinical benefit or where evidence demonstrates the product is not shown to be safe or effective under the conditions of use.

The FDA may also use such procedures to withdraw an accelerated approval if a sponsor fails to conduct any required post-approval study of the product with due diligence, including with respect to “conditions specified by the Secretary.” The new procedures include the provision of due notice and an explanation for a proposed withdrawal, and opportunities for a meeting with the Commissioner or the Commissioner’s designee and a written appeal, among other things.

In March 2023, the FDA issued draft guidance that outlines its current thinking and approach to accelerated approval.

The FDA indicated that the accelerated approval pathway is commonly used for approval of oncology drugs due to the serious and life-threatening nature of cancer.

Although single-arm trials have been commonly used to support accelerated approval, a randomized controlled trial is the preferred approach as it provides a more robust efficacy and safety assessment and allows for direct comparisons to an available therapy.

To that end, the FDA outlined considerations for designing, conducting, and analyzing data for trials intended to support accelerated approvals of oncology therapeutics.

Subsequently, in December 2024 and January 2025, the FDA issued additional draft guidance relating to accelerated approval.

These guidances describe the FDA’s latest thinking on what it means to conduct a confirmatory trial with due diligence and how the agency plans to interpret whether such a study needs to be underway at the time of approval.

While these guidances are currently only in draft form and will ultimately not be legally binding even when finalized, sponsors typically observe the FDA’s guidance closely to ensure that their investigational products qualify for accelerated approval.

● Regenerative advanced therapy.

With passage of the 21st Century Cures Act, in December 2016, Congress authorized the FDA to accelerate review and approval of products designated as regenerative advanced therapies.

A product is eligible for this designation if it is a regenerative medicine therapy that is intended to treat, modify, reverse or cure a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product candidate has the potential to address unmet medical needs for such disease or condition.

The benefits of a regenerative advanced therapy designation include early interactions with the FDA to expedite development and review, benefits available to breakthrough therapies, potential eligibility for priority review and accelerated approval based on surrogate or intermediate endpoints.

Acceptance and Review of BLAs

Assuming successful completion of the required clinical testing, the results of the preclinical studies and clinical trials, along with information relating to the product’s chemistry, manufacturing, controls, safety updates, patent information, abuse information and proposed labeling, are submitted to the FDA as part of an application requesting approval to market the product candidate for one or more indications.

Data may come from company-sponsored clinical trials or from a number of alternative sources, including studies initiated by investigators.

To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety, potency and purity of the biological product to the satisfaction of the FDA.

The fee required for the submission and review of an application under the Prescription Drug User Fee Act, or PDUFA, is substantial (for example, for fiscal year 2025 this application fee is approximately $4.3 million), and the sponsor of an approved application is also subject to an annual program fee, currently $403,889 per eligible prescription product.

These fees are typically adjusted annually, and exemptions and waivers may be available under certain circumstances, such as where a waiver is necessary to protect the public health, where the fee would present a significant barrier to innovation, or where the sponsor is a small business submitting its first human therapeutic application for review.

The FDA conducts a preliminary review of all applications within 60 calendar days of receipt and must inform the sponsor at that time or before whether an application is sufficiently complete to permit substantive review.

In pertinent part, the FDA’s regulations state that an application “shall not be considered as filed until all pertinent information and data have been received” by the FDA.

In the event that FDA determines that an application does not satisfy this standard, it will issue a Refuse to File, or RTF, determination to the sponsor.

Typically, an RTF will be based on administrative incompleteness, such as clear omission of information or sections of required information;

scientific incompleteness, such as omission of critical data, information or analyses needed to evaluate safety, potency and purity or provide adequate directions for use;

or inadequate content, presentation, or organization of information such that substantive and meaningful review is precluded.

The FDA may request additional information rather than accept an application for filing.

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

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

After the submission is accepted for filing, the FDA begins an in-depth substantive review of the application.

The FDA reviews the application to determine, among other things, whether the proposed product is safe and effective for its intended use, whether it has an acceptable purity profile and whether the product is being manufactured in

accordance with cGMP.

Under the goals and policies agreed to by the FDA under PDUFA, the FDA has 10 months from the filing date in which to complete its initial review of a standard application that is a new molecular entity, and six months from the filing date for an application with “priority review”.

The review process may be extended by the FDA for three additional months to consider new information or in the case of a clarification provided by the sponsor to address an outstanding deficiency identified by the FDA following the original submission.

Despite these review goals, it is not uncommon for FDA review of an application to extend beyond the PDUFA goal date.

The FDA seeks to meet these timelines for review of an application but its ability to do so may be affected by a variety of factors.

While the costs associated with review of an application are typically covered by the PDUFA user fee program, other activities, including government budget and funding levels, the ability to hire and retain key personnel and statutory, regulatory and policy changes, may impact the FDA’s review and approval of marketing applications.

Average review times at the agency have fluctuated in recent years, as a result.

For example, during the past decade, the U.S.

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

Further, there is substantial uncertainty as to how measures being implemented by the new Trump Administration across the government will impact the FDA and other federal agencies with jurisdiction over biologics.

For example, the potential loss of FDA personnel could lead to further disruptions and delays in the FDA operations and activities.

In connection with its review of an application, the FDA will typically submit information requests to the sponsor and set deadlines for responses thereto.

The FDA will also conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether the manufacturing processes and facilities comply with cGMPs.

The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and are adequate to assure consistent production of the product within required specifications.

The FDA also may inspect the sponsor and one or more clinical trial sites to assure compliance with IND and GCP requirements and the integrity of the clinical data submitted to the FDA.

With passage of FDORA, Congress clarified FDA’s authority to conduct inspections by expressly permitting inspection of facilities involved in the preparation, conduct, or analysis of clinical and non-clinical studies submitted to FDA as well as other persons holding study records or involved in the study process.

To ensure cGMP and GCP compliance by its employees and third-party contractors, a sponsor may incur significant expenditure of time, money and effort in the areas of training, record keeping, production and quality control.

Additionally, the FDA may refer an application, including applications for novel product candidates which present difficult questions of safety, potency or purity, to an advisory committee for review, evaluation and recommendation as to whether the application should be approved and under what conditions.

Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions.

The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations when making final decisions on approval.

Data from clinical trials are not always conclusive, and the FDA or its advisory committee may interpret data differently than the sponsor interprets the same data.

The FDA may also re-analyze the clinical trial data, which could result in extensive discussions between the FDA and the sponsor during the review process.

Moreover, the FDA will review a sponsor’s financial relationship with the principal investigators who conducted the clinical trials in support of the BLA.

That is because, under certain circumstances, principal investigators at a clinical trial site may also serve as scientific advisors or consultants to a sponsor and receive compensation in connection with such services.

Depending on the level of that compensation and any other financial interest a principal investigator may have in a sponsor, the sponsor may be required to report these relationships to the FDA.

The FDA will then evaluate that financial relationship and determine whether it creates a conflict of interest or otherwise affects the interpretation of the trial or the integrity of the data generated at the principal investigator’s clinical trial site.

If so, the FDA may exclude data from the clinical trial site in connection with its determination of safety, potency or purity of the investigational product.

The FDA also may require submission of a REMS, if it determines that a REMS is necessary to ensure that the benefits of the product outweigh its risks and to assure the safe use of the product.

The REMS could include medication guides, physician communication plans, assessment plans and/or elements to assure safe use, such as restricted

distribution methods, patient registries or other risk minimization tools.

The FDA determines the requirement for a REMS, as well as the specific REMS provisions, on a case-by-case basis.

If the FDA concludes a REMS is needed, the sponsor of the application must submit a proposed REMS and the FDA will not approve the application without a REMS.

Decisions on BLAs

On the basis of the FDA’s evaluation of the application and accompanying information, including the results of the inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter, or CRL.

To reach a determination of approval, the FDA must determine that the biologic is safe, pure and potent and that its expected benefits outweigh its potential risks to patients.

This “benefit-risk” assessment is informed by the extensive body of evidence about the product in the BLA.

This assessment is also informed by other factors, including:

the severity of the underlying condition and how well patients’ medical needs are addressed by currently available therapies;

uncertainty about how the premarket clinical trial evidence will extrapolate to real-world use of the product in the post-market setting;

and whether risk management tools are necessary to manage specific risks.

In connection with this assessment, the FDA review team will assemble all individual reviews and other documents into an “action package,” which becomes the record for FDA review.

The review team then issues a recommendation and a senior FDA official makes a decision.

With respect to the evidentiary standard for making this determination, the FDA typically requires a robust safety database and two adequate and well-controlled clinical investigations to establish effectiveness of a new product.

Under certain circumstances, however, the FDA has indicated that a single trial with certain characteristics and additional information may satisfy this standard.

This approach was subsequently endorsed by Congress in 1998 with legislation providing, in pertinent part, that “If the FDA determines, based on relevant science, that data from one adequate and well-controlled clinical investigation and confirmatory evidence (obtained prior to or after such investigation) are sufficient to establish effectiveness, the FDA may consider such data and evidence to constitute substantial evidence.” This modification to the law recognized the potential for the FDA to find that one adequate and well controlled clinical investigation with confirmatory evidence, including supportive data outside of a controlled trial, is sufficient to establish effectiveness.

In December 2019, the FDA issued draft guidance further explaining the studies that are needed to establish substantial evidence of effectiveness.

The FDA has not yet finalized that guidance, but it did issue draft guidance in September 2023 that outlines considerations for relying on confirmatory evidence in lieu of a second clinical trial to demonstrate efficacy.

A CRL indicates that the review cycle of the application is complete, and the application will not be approved in its present form.

A CRL generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application.

The CRL may require additional clinical or other data, additional pivotal Phase 3 clinical trial(s) and/or other significant and time-consuming requirements related to clinical trials, preclinical studies or manufacturing.

If a CRL is issued, the sponsor will have one year to respond to the deficiencies identified by the FDA, at which time the FDA can deem the application withdrawn or, in its discretion, grant the sponsor an additional six month extension to respond.

The FDA has committed to reviewing resubmissions in response to an issued CRL in either two or six months depending on the type of information included.

Even with the submission of this additional information, however, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

The FDA has taken the position that a CRL is not final agency action making the determination subject to judicial review.

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

That is, the approval will be limited to the conditions of use (e.g., patient population, indication) described in the FDA-approved labeling.

Further, depending on the specific risk(s) to be addressed, the FDA may require that contraindications, warnings or precautions be included in the product labeling, require that post-approval trials, including Phase 4 clinical trials, be conducted to further assess a product’s safety after approval, require testing and surveillance programs to monitor the product after commercialization or impose other conditions, including distribution and use restrictions or other risk management mechanisms under a REMS which can materially affect the potential market and profitability of the product.

The FDA may prevent or limit further marketing of a product based on the results of post-marketing trials or surveillance programs.

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

Under the Ensuring Innovation Act, which was signed into law in April 2021, the FDA must publish action packages summarizing its decisions to approve new biologics within 30 days of approval of such products.

To date, CRLs are not publicly available documents.

Post-Approval Regulation

If regulatory approval for marketing of a new product or new indication for an existing product is obtained, the sponsor will be required to comply with all regular post-approval regulatory requirements as well as any post-approval requirements that the FDA may have imposed as part of the approval process.

The sponsor will be required to report, among other things, certain adverse reactions and manufacturing problems to the FDA, provide updated safety, potency and purity information and comply with requirements concerning advertising and promotional labeling requirements.

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 ongoing regulatory requirements, including cGMP regulations, which impose certain procedural and documentation requirements upon manufacturers.

Accordingly, the sponsor and its third-party manufacturers must continue to expend time, money and effort in the areas of production and quality control to maintain compliance with cGMP regulations and other regulatory requirements.

A product may also be subject to official lot release, meaning that the manufacturer is required to perform certain tests on each lot of the product before it is released for distribution.

If the product is subject to official release, the manufacturer must submit samples of each lot, together with a release protocol showing a summary of the history of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot, to the FDA.

The FDA may in addition perform certain confirmatory tests on lots of some products before releasing the lots for distribution.

Finally, the FDA will conduct laboratory research related to the safety, purity, potency and effectiveness of pharmaceutical products.

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

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 safety risks;

or imposition of distribution or other restrictions under a REMS program.

Other potential consequences include, among other things:

● restrictions on the marketing or manufacturing of the 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 product license approvals;

● product seizure or detention, or refusal to permit the import or export of products;

● injunctions or the imposition of civil or criminal penalties.

The FDA strictly regulates the marketing, labeling, advertising and promotion of prescription products placed on the market.

This regulation includes, among other things, standards and regulations for direct-to-consumer advertising, communications regarding unapproved uses, industry-sponsored scientific and educational activities, and promotional activities involving the Internet and social media.

Promotional claims about a product’s safety or effectiveness are prohibited before the product is approved.

After approval, a product generally may not be promoted for uses that are not approved by the FDA, as reflected in the product’s prescribing information.

In September 2021, the FDA published final regulations which describe the types of evidence that the FDA will consider in determining the intended use of a biologic.

It may be permissible, under very specific, narrow conditions, for a manufacturer to engage in nonpromotional, non-misleading communication regarding off-label information, such as distributing scientific or medical journal information, such as distributing scientific or medical journal information.

Further, with passage of the Pre-Approval Information Exchange Act in December 2022, sponsors of products that have not been approved may proactively communicate to payors certain information about products in development to help expedite patient access upon product approval.

Previously, such communications were permitted under FDA guidance but the new legislation explicitly provides protection to sponsors who convey certain information about products in development to payors, including unapproved uses of approved products.

In addition, in January 2025, the FDA published final guidance outlining its policies governing the distribution of scientific information to healthcare providers about unapproved uses of approved products.

The final guidance calls for such communications to be truthful, non-misleading and scientifically sound and to include all information necessary for healthcare providers to interpret the strengths and weaknesses and validity and utility of the information about the unapproved use of the approved product.

If a company engages in such communications consistent with the guidance’s recommendations, the FDA indicated that it will not treat such communications as evidence of unlawful promotion of a new intended use for the approved product.

If a company is found to have promoted off-label uses, it may become subject to adverse public relations and administrative and judicial enforcement by the FDA, the Department of Justice, or the DOJ, or the Office of the Inspector General of the Department of Health and Human Services, as well as state authorities.

This could subject a company to a range of penalties that could have a significant commercial impact, including civil and criminal fines and agreements that materially restrict the manner in which a company promotes or distributes products.

The federal government has levied large civil and criminal fines against companies for alleged improper promotion, and has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed.

In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, and its implementing regulations, as well as the Drug Supply Chain Security Act, or DSCSA, which regulate the distribution and tracing of prescription drug samples at the federal level, and set minimum standards for the regulation of distributors by the states.

The PDMA, its implementing regulations and state laws limit the distribution of prescription pharmaceutical product samples, and the DSCSA imposes requirements to ensure accountability in distribution and to identify and remove counterfeit and other illegitimate products from the market.

Manufacturers were required by November 2023 to have such systems and processes in place to comply with the DSCSA, but, so as not to disrupt supply chains, the FDA has granted certain exemptions from enhanced drug distribution security requirements for eligible trading partners for particular periods of time.

Regulatory Exclusivity Governing Biologics

When a biological product is licensed for marketing by the FDA with approval of a BLA, the product may be entitled to certain types of market and data exclusivity barring the FDA from approving competing products for certain periods of time.

periods of time.

In March 2010, the Patient Protection and Affordable Care Act was enacted in the United States and included the Biologics Price Competition and Innovation Act of 2009, or the BPCIA.

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In addition, since passage of the BPCIA, many states have passed laws or amendments to laws, which address pharmacy practices involving biosimilar products.

Pediatric Exclusivity

Pediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted, provides for the attachment of an additional six months of exclusivity.

For biologic products, the six month period may be attached to any existing regulatory exclusivities but not to any patent terms.

The conditions for pediatric exclusivity include the FDA’s determination that information relating to the use of a new product in the pediatric population may produce health benefits in that population, the FDA making a written request for pediatric clinical trials, and the sponsor agreeing to perform, and reporting on, the requested clinical trials within the statutory timeframe.

This six-month exclusivity may be granted if a sponsor submits pediatric data that fairly respond to a written request from the FDA for such data.

The data do not need to show the product to be effective in the pediatric population studied;

rather, if the clinical trial is deemed to fairly respond to the FDA’s request, the additional protection is granted.

If reports of requested pediatric studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patents that cover the product are extended by six months.

Although this is not a patent term extension, it effectively extends the regulatory period during which the FDA cannot approve another application.

Orphan Drug Designation and Exclusivity

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Patent and Trademark Office reviews and approves the application for any patent term extension or restoration in consultation with the FDA.

Companion Diagnostics

In August 2014, the FDA issued final guidance clarifying the requirements that will apply to approval of therapeutic products and in vitro companion diagnostics.

According to the guidance, for novel biologics, a companion diagnostic device and its corresponding therapeutic should be approved or cleared contemporaneously by the FDA for the use indicated in the therapeutic product’s labeling.

Approval or clearance of the companion diagnostic device will ensure that the device has been adequately evaluated and has adequate performance characteristics in the intended population.

In July 2016, the FDA issued a draft guidance intended to assist sponsors of the therapeutic product and in vitro companion diagnostic device on issues related to co-development of the products.

The 2014 guidance also explains that a companion diagnostic device used to make treatment decisions in clinical trials of a biologic product candidate generally will be considered an investigational device, unless it is employed for an intended use for which the device is already approved or cleared.

If used to make critical treatment decisions, such as patient selection, the diagnostic device generally will be considered a significant risk device under the FDA’s Investigational Device Exemption, or IDE, regulations.

Thus, the sponsor of the diagnostic device will be required to comply with the IDE regulations.

According to the guidance, if a diagnostic device and a product are to be studied together to support their respective approvals, both products can be studied in the same investigational study, if the study meets both the requirements of the IDE regulations and the IND regulations.

The guidance provides that depending on the details of the study plan and subjects, a sponsor may seek to submit an IND application alone, or both an IND and IDE application.

In April 2020, the FDA issued additional guidance which describes considerations for the development and labeling of companion diagnostic devices to support the indicated uses of multiple drug or biological oncology products, when appropriate.

This guidance builds upon existing policy regarding the labeling of companion diagnostics.

In its 2014 guidance, the FDA stated that if evidence is sufficient to conclude that the companion diagnostic is appropriate for use with a specific group of therapeutic products, the companion diagnostic’s intended use/indications for use should name the specific group of therapeutic products, rather than specific products.

The 2020 guidance expands on the policy statement in the 2014 guidance by recommending that companion diagnostic developers consider a number of factors when determining whether their test could be developed, or the labeling for approved companion diagnostics could be revised through a supplement, to support a broader labeling claim such as use with a specific group of oncology therapeutic products (rather than listing an individual therapeutic product(s)).

Under the FDCA, in vitro diagnostics, including companion diagnostics, are regulated as medical devices.

In the United States, the FDCA and its implementing regulations, and other federal and state statutes and regulations govern, among other things, medical device design and development, preclinical and clinical testing, premarket clearance or approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution, export and import, and post-market surveillance.

Unless an exemption applies, diagnostic tests require pre-notification marketing clearance or approval from the FDA prior to commercial distribution.

The FDA previously has required in vitro companion diagnostics intended to select the patients who will respond to the product candidate to obtain pre-market approval, or PMA, simultaneously with approval of the therapeutic product candidate.

The PMA process, including the gathering of clinical and preclinical data and the submission to and review by the FDA, can take several years or longer.

It involves a rigorous premarket review during which the sponsor must prepare and provide the FDA with reasonable assurance of the device’s safety and effectiveness

and information about the device and its components regarding, among other things, device design, manufacturing and labeling.

PMA applications are subject to an application fee.

After a device is placed on the market, it remains subject to significant regulatory requirements.

Medical devices may be marketed only for the uses and indications for which they are cleared or approved.

Device manufacturers must also establish registration and device listings with the FDA.

A medical device manufacturer’s manufacturing processes and those of its suppliers are required to comply with the applicable portions of the Quality System Regulation, which covers the methods and documentation of the design, testing, production, processes, controls, quality assurance, labeling, packaging, and shipping of medical devices.

Domestic facility records and manufacturing processes are subject to periodic unscheduled inspections by the FDA.

The FDA also may inspect foreign facilities that export products to the United States.

It is possible that an in vitro companion diagnostic device could be subject to FDA enforcement discretion from compliance with the FDCA if it meets the definition of a Laboratory Developed Test, or LDT.

However, the FDA issued a final rule in April 2024 to end enforcement discretion for LDTs and actively regulate such products as medical devices.

Under this final rule, LDTs are required to come into compliance with FDA’s medical device regulatory requirements in a staged approach over the course of four years.

The implementation of this LDT final rule could potentially be affected by an executive order issued by President Trump in January 2025 and/or the anticipated change in leadership at the FDA under the new administration.

Further, while the final regulation is set to take effect on May 6, 2025, a number of parties have challenged the legality of such regulation in a federal district court.

Healthcare Law and Regulation

Health care providers and third-party payors play a primary role in the recommendation and prescription of drug products that are granted marketing approval.

Arrangements with providers, consultants, third-party payors and customers are subject to broadly applicable fraud and abuse, anti-kickback, false claims laws, patient privacy laws and regulations and other health care laws and regulations that may constrain business and/or financial arrangements.

Restrictions under applicable federal and state health care laws and regulations, include the following:

● the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, paying, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made, in whole or in part, under a federal health care program such as Medicare and Medicaid;

● the federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary penalties laws, which prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false, fictitious or fraudulent or knowingly making, using or causing to made or used a false record or statement to avoid, decrease or conceal an obligation to pay money to the federal government.

● the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal laws that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any health care benefit program or making false statements relating to health care matters;

● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their respective implementing regulations, including the Final Omnibus Rule published in January 2013, which impose obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

● the federal false statements statute, which prohibits knowingly and willfully falsifying, concealing ·or covering up a material fact or making any materially false statement in connection with the delivery of or payment for health care benefits, items or services;

● the Foreign Corrupt Practices Act, or FCPA, which prohibits companies and their intermediaries from making, or offering or promising to make improper payments to non-U.S.

officials for the purpose of obtaining or retaining business or otherwise seeking favorable treatment;

● the federal transparency requirements known as the federal Physician Payments Sunshine Act, under the Patient Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation Act, or the Affordable Care Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies to report annually to the Centers for Medicare & Medicaid Services, or CMS, within the United States Department of Health and Human Services, information related to payments and other transfers of value made by that entity to physicians, other healthcare providers and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members;

● analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to health care items or services that are reimbursed by non-government third-party payors, including private insurers.

Healthcare Laws and Regulations

Arrangements with providers, consultants, third-party payors and customers may be subject to numerous federal and state healthcare laws, including broadly applicable fraud and abuse, anti-kickback, false claims, transparency, patient privacy, and other healthcare laws and regulations that may constrain business and/or financial arrangements.

These laws include, among others, the federal Anti-Kickback Statute;

federal civil and criminal false claims laws, including the False Claims Act;

HIPAA and related privacy and security regulations;

the federal false statements statute;

the Foreign Corrupt Practices Act;

the Physician Payments Sunshine Act;

and analogous state and foreign laws.

Further, some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring manufacturers to report information related to payments to physicians and other health care providers or marketing expenditures.

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

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

Healthcare Reform

A primary trend in the U.S.

healthcare industry and elsewhere is cost containment.

There have been a number of federal and state proposals during the last few years regarding the pricing of drug and biologic products, limiting coverage and reimbursement for medical products and other changes to the healthcare system in the United States.

In March 2010, the United States Congress enacted the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the ACA, which, among other things, includes changes to the coverage and payment for pharmaceutical products under government healthcare programs.

Other legislative changes have been proposed and adopted since the ACA was enacted.

In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress.

A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs.

These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013 and will remain in effect through the first half of 2032.

Under current legislation, the actual reductions in Medicare payments may vary up to 4%.

The Consolidated Appropriations Act, which was signed into law by President Biden in December 2022, made several changes to sequestration of the Medicare program.

Section 1001 of the Consolidated Appropriations Act delays the 4% Statutory Pay-As-You-Go Act of 2010 sequester for two years, through the end of 2024.

Triggered by enactment of the American Rescue Plan Act of 2021, the 4% cut to the Medicare program would have taken effect in January 2023.

The Consolidated Appropriations Act’s health care offset title includes Section 4163, which extends the 2% Budget Control Act of 2011 Medicare sequester for six months into 2032 and lowers the payment reduction percentages in years 2030 and 2031.

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

For example, with enactment of the Tax Cuts and Jobs Act of 2017, which was signed into law on December 22, 2017, Congress repealed the “individual mandate.” The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, became effective in 2019.

In June 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.

Shortly after taking office in January 2025, President Trump revoked numerous executive orders issued by former President Biden, including at least two executive orders

which were designed to further implement the ACA.

We anticipate similar efforts to alter the ACA, and litigation and legislation over the ACA are likely to continue, with unpredictable and uncertain results.

Pharmaceutical Prices

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

There have been several recent U.S.

congressional inquiries, as well as proposed and enacted state and federal legislation designed to, among other things, bring more transparency to pharmaceutical pricing, review the relationship between pricing and manufacturer patient programs, and reduce the costs of pharmaceuticals under Medicare and Medicaid.

In 2020, President Trump issued several executive orders intended to lower the costs of prescription products and certain provisions in these orders have been incorporated into regulations.

These regulations include an interim final rule implementing a most favored nation model for prices that would tie Medicare Part B payments for certain physician-administered pharmaceuticals to the lowest price paid in other economically advanced countries, effective January 1, 2021.

That rule, however, has been subject to a nationwide preliminary injunction and, on December 29, 2021, CMS issued a final rule to rescind it.

With issuance of this rule, CMS stated that it will explore all options to incorporate value into payments for Medicare Part B pharmaceuticals and improve beneficiaries' access to evidence-based care.

In addition, in October 2020, the Department of Human and Health Services, or HHS, and the FDA published a final rule allowing states and other entities to develop a Section 804 Importation Program to import certain prescription drugs from Canada into the United States.

That regulation was challenged in a lawsuit by the Pharmaceutical Research and Manufacturers of America, or PhRMA, but the case was dismissed by a federal district court in February 2023 after the court found that PhRMA did not have standing to sue HHS.

Several states have passed legislation establishing workgroups to examine the impact of a state importation program.

Several states have also passed laws allowing for the importation of drugs from Canada.

Certain of these states have submitted Section 804 Importation Program proposals and are awaiting FDA approval.

On January 5, 2024, the FDA approved Florida’s plan for Canadian drug importation.

Florida now has authority to import certain products from Canada for a period of two years once certain conditions are met.

Florida will first need to submit a pre-import request for each product selected for importation, which must be approved by the FDA.

Florida will also need to relabel the products and perform quality testing of the products to meet FDA standards.

Further, HHS finalized 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 final rule would also eliminate the current safe harbor for Medicare drug rebates and create new safe harbors for beneficiary point-of-sale discounts and pharmacy benefit manager service fees.

It originally was set to go into effect on January 1, 2022, but with passage of the Inflation Reduction Act of 2022, or IRA, has been delayed by Congress to January 1, 2032.

The IRA has implications for Medicare Part D, which is a program available to individuals who are entitled to Medicare Part A or enrolled in Medicare Part B to give them the option of paying a monthly premium for outpatient prescription drug coverage.

Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare beginning in 2026, with prices that can be negotiated subject to a cap;

imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation;

and replaces the Part D coverage gap discount program with a new discounting program beginning in 2025.

The IRA permits the Secretary of HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years.

Specifically, with respect to price negotiations, Congress authorized Medicare to negotiate lower prices for certain costly single-source drug and biologic products that do not have competing generics or biosimilars and are reimbursed under Medicare Part B and Part D.

CMS may negotiate prices for ten high-cost drugs paid for by Medicare Part D starting in 2026, followed by 15 Part D drugs in 2027, 15 Part B or Part D drugs in 2028 and 20 Part B or Part D drugs in 2029 and beyond.

This provision applies to drug products that have been approved for at least 9 years and biologics that have been licensed for 13 years, but it does not apply to drugs and biologics that have been approved for a single rare disease or condition.

In August 2024, HHS published the results of the first Medicare drug price negotiations for ten selected drugs that treat a range of conditions, including diabetes, chronic kidney disease, and rheumatoid arthritis.

The prices of these

ten drugs will become effective January 1, 2026.

In January 2025, CMS announced its selection of 15 additional drugs covered by Part D for the second cycle of negotiations.

CMS issued a public statement on January 29, 2025, declaring that lowering the cost of prescription drugs is a top priority of the new administration and CMS is committed to considering opportunities to bring greater transparency in the negotiation program.

The second cycle of negotiations with participating drug companies will occur during 2025, and any negotiated prices for this second set of drugs will be effective starting January 1, 2027.

Further, the legislation subjects drug manufacturers to civil monetary penalties and a potential excise tax for failing to comply with the legislation by offering a price that is not equal to or less than the negotiated “maximum fair price” under the law or for taking price increases that exceed inflation.

The law also caps Medicare out-of-pocket drug costs at an estimated $2,000 a year beginning in 2025.

In addition to the drug price negotiation program, the IRA established inflation rebate programs under Medicare Part B and Part D.

These programs require manufacturers to pay rebates to Medicare if they raise their prices for certain Part B and Part D drugs faster than the rate of inflation.

On December 9, 2024, with the issuance of its 2025 Physician Fee Schedule final regulation, CMS finalized its rules governing the IRA inflation rebate programs.

The IRA includes a provision exempting orphan drugs from Medicare price negotiation but this exclusion has been interpreted by CMS in final guidance issued in July 2023 to apply only to those orphan drugs with an approved indication (or indications) for a single rare disease or condition.

The final guidance clarifies that CMS will consider only active designations/approvals when evaluating a drug for the exclusion, such that designations/indications withdrawn before the selected drug publication date will not be considered.

CMS also clarified that, if a drug loses its orphan drug exclusion status, the agency will use the earliest date of approval/licensure to determine whether the product is a qualifying single source drug subject to price negotiations.

In June 2023, Merck & Co.

filed a lawsuit against HHS and CMS asserting that, among other things, the IRA’s Drug Price Negotiation Program for Medicare constitutes an uncompensated taking in violation of the Fifth Amendment of the Constitution.

Subsequently, a number of other parties, including the U.S.

Chamber of Commerce and pharmaceutical companies, also filed lawsuits in various courts with similar constitutional claims against HHS and CMS.

We expect that litigation involving these and other provisions of the IRA will continue, with unpredictable and uncertain results.

At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

A number of states, for example, require drug manufacturers and other entities in the drug supply chain, including health carriers, pharmacy benefit managers, wholesale distributors, to disclose information about pricing of pharmaceuticals.

In addition, regional healthcare organizations and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription pharmaceutical and other healthcare programs.

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

This is increasingly true with respect to products approved pursuant to the accelerated approval pathway.

State Medicaid programs and other payers are developing strategies and implementing significant coverage barriers, or refusing to cover these products outright, arguing that accelerated approval drugs have insufficient or limited evidence despite meeting the FDA’s standards for accelerated approval.

The scope and enforcement of federal and state healthcare laws and regulations are broad and often uncertain and subject to change.

Violations of any such federal and state healthcare laws and regulations may include, among other things, penalties such as civil or criminal penalties, monetary damages, or exclusion from participation in government contracting, healthcare reimbursement or other government programs.

Federal and State Data Privacy Laws

There are multiple privacy and data security laws that may impact our business activities, in the United States and in other countries where we conduct trials or where we may do business in the future.

There are multiple privacy and data security laws that may impact our business activities, in the United States and in other countries where we may conduct trials or where we may do business in the future.

These laws are evolving and may increase both our obligations and our regulatory risks in the future.

In the health care industry generally, under HIPAA, HHS has issued regulations to protect the privacy and security of protected health information used or disclosed by covered entities including certain healthcare providers, health plans and healthcare clearinghouses.

HIPAA also regulates standardization of data content, codes and formats used in healthcare transactions and standardization of identifiers for health plans and providers.

HIPAA also imposes certain obligations on the business associates of covered

entities that obtain protected health information in providing services to or on behalf of covered entities.

HIPAA also imposes certain obligations on the business associates of covered entities that obtain protected health information in providing services to or on behalf of covered entities.

HIPAA may apply to us in certain circumstances and may also apply to our business partners in ways that may impact our relationships with them.

Our clinical trials are regulated by the Common Rule, which also includes specific privacy-related provisions.

In addition to federal privacy regulations, there are a number of state laws governing confidentiality and security of health information that may be applicable to our business.

In addition to possible federal civil and criminal penalties for HIPAA violations, state attorneys general are authorized to file civil actions for damages or injunctions in federal courts to enforce HIPAA and seek attorney’s fees and costs associated with pursuing federal civil actions.

In addition, state attorneys general (along with private plaintiffs) have brought civil actions seeking injunctions and damages resulting from alleged violations of HIPAA’s privacy and security rules.

State attorneys general also have authority to enforce state privacy and security laws.

New laws and regulations governing privacy and security may be adopted in the future as well.

States are also active in creating specific rules relating to the processing of personal information.

In 2018, California passed into law the California Consumer Privacy Act, or CCPA, which took effect on January 1, 2020 and imposed many requirements on businesses that process the personal information of California residents.

Many of the CCPA’s requirements are similar to those found in the General Data Protection Regulation, or GDPR, in Europe, including requiring businesses to provide notice to data subjects regarding the information collected about them and how such information is used and shared, and providing data subjects the right to request access to such personal information and, in certain cases, request the erasure of such personal information.

The CCPA also affords California residents the right to opt-out of “sales” of their personal information.

The CCPA contains significant penalties for companies that violate its requirements.

In November 2020, California voters passed a ballot initiative for the California Privacy Rights Act, or CPRA, which went into effect on January 1, 2023 and significantly expanded the CCPA to incorporate additional GDPR-like provisions including requiring that the use, retention and sharing of personal information of California residents be reasonably necessary and proportionate to the purposes of collection or processing, granting additional protections for sensitive personal information, and requiring greater disclosures related to notice to residents regarding retention of information.

The CPRA also created a new enforcement agency – the California Privacy Protection Agency – whose sole responsibility is to enforce the CPRA, which will further increase compliance risk.

The provisions in the CPRA may apply to some of our business activities.

In addition to California, a number of other states have passed comprehensive privacy laws similar to the CCPA and CPRA.

These laws are either in effect or will go into effect sometime over the next several years.

Like the CCPA and CPRA, these laws create obligations related to the processing of personal information, as well as special obligations for the processing of “sensitive” data (which includes health data in some cases).

Some of the provisions of these laws may apply to our business activities.

There are also states that are strongly considering privacy laws that will go into effect in 2025 and beyond.

Other states will be considering these laws in the future, and Congress has also been debating passing a federal privacy law.

There are also states that are specifically regulating health information that may affect our business.

For example, Washington state passed a health privacy law in 2023 which regulates the collection and sharing of health information that is not otherwise regulated by HIPAA rules, and the law also has a private right of action, which further increases the relevant compliance risk.

Connecticut and Nevada have also passed similar laws regulating consumer health data, and more states are considering such legislation in 2025.

These laws may impact our business activities, including our identification of research subjects, relationships with business partners and ultimately the marketing and distribution of our product candidates, if approved.

Plaintiffs’ lawyers are also increasingly using privacy-related statutes at both the state and federal level to bring lawsuits against companies for their data-related practices.

In particular, there have been a significant number of cases filed against companies for their use of pixels and other web trackers.

These cases often allege violations of the California Invasion of Privacy Act and other state laws regulating wiretapping, as well as the federal Video Privacy Protection Act.

Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available under such laws, it is possible that some of our current or future business activities, including certain clinical research, sales and marketing practices and the provision of certain items and services to our customers, could be subject to challenge under one or more of such privacy and data security laws.

The heightening compliance environment and the need to build and maintain robust and secure systems to comply with different privacy compliance and/or reporting

requirements in multiple jurisdictions could increase the possibility that a healthcare company may fail to comply fully with one or more of these requirements.

If our operations are found to be in violation of any of the privacy or data security laws or regulations described above that are applicable to us, or any other laws that apply to us, we may be subject to penalties, including potentially significant criminal, civil and administrative penalties, damages, fines, contractual damages, reputational harm, diminished profits and future earnings, additional reporting requirements and/or oversight if we become subject to a consent decree or similar agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

To the extent that any product candidates we may develop, once approved, are sold in a foreign country, we may be subject to similar foreign laws.

Review and Approval of Medical Products in the European Union

In order to market any product outside of the United States, a sponsor must also comply with numerous and varying regulatory requirements of other countries and jurisdictions regarding quality, safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of products.

Whether or not it obtains FDA approval for a product, a sponsor will need to obtain the necessary approvals by the comparable non-U.S.

regulatory authorities before it can commence clinical trials or marketing of the product in those countries or jurisdictions.

The process governing approval of medicinal products in the European Union, or EU, generally follows the same lines as in the United States.

It entails satisfactory completion of preclinical studies and adequate and well-controlled clinical trials to establish the safety and efficacy of the product for each proposed indication.

It also requires the submission to the relevant competent authorities of a marketing authorization application, or MAA, and granting of a marketing authorization by these authorities before the product can be marketed and sold in the EU.

Preclinical Studies

Non-clinical studies are performed to demonstrate the health or environmental safety of new chemical or biological substances.

Non-clinical (pharmaco-toxicological) studies must be conducted in compliance with GLP principles as set forth in EU Directive 2004/10/EC (unless otherwise justified for certain particular medicinal products – e.g., radio-pharmaceutical precursors for radio-labeling purposes).

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 Organisation for Economic Co-operation and Development requirements.

Clinical Trial Approval

On January 31, 2022, the new Clinical Trials Regulation (EU) No 536/2014, or the Clinical Trials Regulation, became effective in the European Union and replaced the prior Clinical Trials Directive 2001/20/EC, or the Clinical Trials Directive.

The new regulation aims at simplifying and streamlining the authorization, conduct and transparency of clinical trials in the European Union.

Under the new coordinated procedure for the approval of clinical trials, the sponsor of a clinical trial to be conducted in more than one Member State of the European Union, or EU Member State, will only be required to submit a single application for approval.

The submission will be made through the Clinical Trials Information System, a new clinical trials portal overseen by the European Medicines Agency, or EMA, and available to clinical trial sponsors, competent authorities of the EU Member States and the public.

The extent to which ongoing and new clinical trials will be governed by the Clinical Trials Regulation varies.

Clinical trials for which an application was submitted (i) prior to January 31, 2022 under the Clinical Trials Directive, or (ii) between January 31, 2022 and January 31, 2023 and for which the sponsor has opted for the application of the Clinical Trials Directive, in each case, remained governed by the Clinical Trials Directive until January 31, 2025.

Beginning January 31, 2025, all clinical trials (including those which are ongoing) are subject to the provisions of the Clinical Trials Regulation.

The failure to transition ongoing clinical trials to the Clinical Trials Regulation can result in corrective measures under Article 77 of the Clinical Trials Regulation, including revocation of the authorization of the clinical trial or suspension of the clinical trial as well as criminal sanctions and fines under national law of EU Member States.

Beyond streamlining the process, the Clinical Trials Regulation includes a single set of documents to be prepared and submitted for the application as well as simplified reporting procedures for clinical trial sponsors;

harmonized procedure for the assessment of applications for clinical trials, which is divided in two parts.

Part I is assessed by the competent authorities of all EU Member States in which an application for authorization of a clinical trial has been submitted (EU Member States concerned).

Part II is assessed separately by each EU Member State concerned.

Strict deadlines have been established for the assessment of clinical trial applications.

The role of the relevant ethics committees in the assessment procedure will continue to be governed by the national law of the concerned EU Member State.

However, overall related timelines will be defined by the Clinical Trials Regulation.

The Clinical Trials Regulation did not change the preexisting requirement that a sponsor must obtain prior approval from the competent national authority of the EU Member State in which the clinical trial is to be conducted.

If the clinical trial is conducted in different EU Member States, the competent authorities in each of these EU Member States must provide their approval for the conduct of the clinical trial.

Furthermore, the sponsor may only start a clinical trial at a specific study site after the applicable ethics committee has issued a favorable opinion.

Parties conducting certain clinical trials must, as in the United States, post clinical trial information in the EU at the EU Clinical Trials Register.

PRIME Designation in the EU

In March 2016, the EMA launched an initiative to facilitate development of product candidates in indications, often rare, for which few or no therapies currently exist.

The PRIority MEdicines, or PRIME, scheme is intended to encourage drug development in areas of unmet medical need and provides accelerated assessment of products representing substantial innovation reviewed under the centralized procedure.

Products from small- and medium-sized enterprises, or SMEs, may qualify for earlier entry into the PRIME scheme than larger companies.

Many benefits accrue to sponsors of product candidates with PRIME designation, including but not limited to, early and proactive regulatory dialogue with the EMA, frequent discussions on clinical trial designs and other development program elements, and accelerated marketing authorization application assessment once a dossier has been submitted.

Importantly, a dedicated Agency contact and rapporteur from the Committee for Medicinal Products for Human Use, or CHMP, or Committee for Advanced Therapies are appointed early in PRIME scheme facilitating increased understanding of the product at EMA’s Committee level.

Pediatric Studies

Companies developing a new medicinal product must agree upon a Pediatric Investigation Plan, or PIP, with the EMA’s pediatric committee, or PDCO, and must conduct pediatric clinical trials in accordance with that PIP, unless a waiver applies (e.g., because the relevant disease or condition occurs only in adults).

The PIP sets out the timing and measures proposed to generate data to support a pediatric indication of the drug for which marketing authorization is being sought.

The marketing authorization application for the product must include the results of pediatric clinical trials conducted in accordance with the PIP, unless a waiver applies, or a deferral has been granted by the PDCO 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, in which case the pediatric clinical trials must be completed at a later date.

Marketing Authorization

Marketing authorization applications, or MAAs, can be filed either under the so-called centralized or national authorization procedures, albeit through the Mutual Recognition or Decentralized procedure for a product to be authorized in more than one EU member state.

The centralized procedure provides for the grant of a single marketing authorization following a favorable opinion by the EMA that is valid in all EU Member States, as well as Iceland, Liechtenstein and Norway, which are part of the European Economic Area, or EEA.

The centralized procedure is compulsory for medicines produced by specified biotechnological processes, products designated as orphan medicinal products, advanced-therapy medicines (such as gene-therapy, somatic cell-therapy or tissue-engineered medicines) and products with a new active substance indicated for the treatment of specified diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative disorders or autoimmune diseases and other immune dysfunctions and viral diseases.

The centralized procedure is optional for products that represent a significant therapeutic, scientific or technical innovation, or whose authorization would be in the interest of public health.

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 sponsor in response to questions asked by the CHMP.

Accelerated assessment might be granted by the CHMP in exceptional cases, when a medicinal product is expected to be of a major public health interest, particularly from the point of view of therapeutic innovation.

The timeframe for the evaluation of an MAA under the accelerated assessment procedure is 150 days, excluding stop-clocks.

There are also two other possible routes to authorize medicinal products in several EU countries, which are available for investigational medicinal products that fall outside the scope of the centralized procedure:

● Decentralized procedure .

Using the decentralized procedure, a sponsor may apply for simultaneous authorization in more than one EU country of medicinal products that have not yet been authorized in any EU country and that do not fall within the mandatory scope of the centralized procedure.

The sponsor may choose a member state as the reference member State to lead the scientific evaluation of the application.

● Mutual recognition procedure .

In the mutual recognition procedure, a medicine is first authorized in one EU Member State (which acts as the reference member state), in accordance with the national procedures of that country.

Following this, further marketing authorizations can be progressively sought from other EU countries in a procedure whereby the countries concerned agree to recognize the validity of the original, national marketing authorization produced by the reference member state.

Under the above-described procedures, before granting the marketing authorization, the EMA or the competent authorities of the Member States of the EEA make an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy.

Conditional Marketing Authorization

In particular circumstances, E.U.

legislation (Article 14–a Regulation (EC) No 726/2004 (as amended by Regulation (EU) 2019/5 and Regulation (EC) No 507/2006 on Conditional Marketing Authorizations for Medicinal Products for Human Use) enables sponsors to obtain a “conditional marketing authorization” prior to obtaining the comprehensive clinical data required for an application for a full marketing authorization.

Such conditional approvals may be granted for product candidates (including medicines designated as orphan medicinal products), if (1) the product candidate is intended for the treatment, prevention or medical diagnosis of seriously debilitating or life-threatening disease;

(2) the product candidate is intended to meet unmet medical needs of the patients;

(3) a marketing authorization may be granted prior to submission of comprehensive clinical data provided that the benefit of the immediate availability on the market of the medicinal product concerned outweighs the risk inherent in the fact that additional data are still required;

(4) the risk-benefit balance of the product candidate is positive, and (5) it is likely that the sponsor will be in a position to provide the required comprehensive clinical trial data.

A conditional marketing authorization may contain specific obligations to be fulfilled by the marketing authorization holder, including obligations with respect to the completion of ongoing or new studies, and with respect to the collection of pharmacovigilance data.

Conditional marketing authorizations are valid for one year, and may be renewed annually, if the risk-benefit balance remains positive, and after an assessment of the need for additional or modified conditions or specific obligations.

The timelines for the centralized procedure described above also apply with respect to the review by the CHMP of applications for a conditional marketing authorization, but sponsors can also request EMA to conduct an accelerated assessment, for instance, in cases of unmet medical needs.

Periods of Authorization and Renewals

A marketing authorization has an initial validity for five years in principle.

The marketing authorization may be renewed after five years on the basis of a re-evaluation of the risk-benefit balance by the EMA or by the competent authority of the EU Member State.

To this end, the marketing authorization holder must provide the EMA or the competent authority with a consolidated version of the file in respect of quality, safety and efficacy, including all variations introduced since the marketing authorization was granted, at least six months before the marketing authorization ceases to be valid.

The European Commission or the competent authorities of the EU Member States may decide, on justified grounds relating to pharmacovigilance, to proceed with one further five-year period of marketing authorization.

Once subsequently definitively renewed, the marketing authorization shall be valid for an unlimited period.

Any authorization which is not followed by the actual placing of the medicinal product on the EU market (in case

of centralized procedure) or on the market of the authorizing EU Member State within three years after authorization ceases to be valid (the so-called sunset clause).

Regulatory Requirements after a Marketing Authorization has been Obtained

In case an authorization for a medicinal product in the EU is obtained, the holder of the marketing authorization is required to comply with a range of requirements applicable to the manufacturing, marketing, promotion and sale of medicinal products.

These include:

● Compliance with the EU’s stringent pharmacovigilance or safety reporting rules must be ensured.

These rules can impose post-authorization studies and additional monitoring obligations.

● The manufacturing of authorized medicinal products, for which a separate manufacturer’s license is mandatory, must also be conducted in strict compliance with the applicable EU laws, regulations and guidance, including Directive 2001/83/EC, Directive 2003/94/EC, Regulation (EC) No 726/2004 and the European Commission Guidelines for Good Manufacturing Practice.

These requirements include compliance with EU cGMP standards when manufacturing medicinal products and active pharmaceutical ingredients, including the manufacture of active pharmaceutical ingredients outside of the EU with the intention to import the active pharmaceutical ingredients into the EU.

● The marketing and promotion of authorized drugs, including industry-sponsored continuing medical education and advertising directed toward the prescribers of drugs and/or the general public, are strictly regulated in the EU notably under Directive 2001/83EC, as amended, and EU Member State laws.

Direct-to-consumer advertising of prescription medicines is prohibited across the EU.

Regulatory Data Protection in the EU

In the EU, innovative medicinal products approved on the basis of a complete independent data package qualify for eight years of data exclusivity upon marketing authorization and an additional two years of market exclusivity pursuant to Directive 2001/83/EC.

Regulation (EC) No 726/2004 repeats this entitlement for medicinal products authorized in accordance the centralized authorization procedure.

Data exclusivity prevents sponsors for authorization of generics of these innovative products from referencing the innovator’s data to assess a generic (abridged) application for a period of eight years.

During an additional two-year period of market exclusivity, a generic marketing authorization application can be submitted and authorized, and the innovator’s data may be referenced, but no generic medicinal product can be placed on the EU market until the expiration of the market exclusivity.

The overall ten-year period will be extended to a maximum of 11 years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies.

Even if a compound is considered to be a new chemical entity so that the innovator gains the prescribed period of data exclusivity, another company nevertheless could also market another version of the product if such company obtained marketing authorization based on an MAA with a complete independent data package of pharmaceutical tests, preclinical tests and clinical trials.

The EU pharmaceutical legislation is currently undergoing a complete review process, in the context of the Pharmaceutical Strategy for Europe initiative, launched by the European Commission in November 2020.

The European Commission’s proposal for revision of several legislative instruments related to medicinal products was published in April 2023 and includes, among other things, provisions that would potentially reduce the duration of regulatory data protection.

The European Parliament requested several amendments in April 2024.

At this time, the proposed revisions remain to be agreed and adopted by the European Parliament and European Council and the proposals may therefore be substantially revised before adoption, which is not anticipated before early 2026.

The revisions may, however, have a significant impact on the pharmaceutical industry in the long term, if and when adopted.

Pediatric Exclusivity

If a sponsor obtains a marketing authorization in all EU Member States, or a marketing authorization granted in the centralized procedure by the European Commission, and the study results for the pediatric population are included in the product information, even when negative, the medicine is then eligible for an additional six-month period of

qualifying patent protection through extension of the term of the Supplementary Protection Certificate, or SPC, or alternatively a one year extension of the regulatory market exclusivity from ten to eleven years, as selected by the marketing authorization holder.

Orphan Drug Designation and Exclusivity

Regulation (EC) No.

141/2000, as implemented by Regulation (EC) No.

847/2000 provides that a drug can be designated as an orphan drug by the European Commission if its sponsor can establish:

that the product is intended for the diagnosis, prevention or treatment of (1) a life-threatening or chronically debilitating condition affecting not more than five in ten thousand persons in the EU when the application is made, or (2) a life-threatening, seriously debilitating or serious and chronic condition in the EU and that without incentives it is unlikely that the marketing of the drug in the EU would generate sufficient return to justify the necessary investment.

For either of these conditions, the sponsor must demonstrate that there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question that has been authorized in the EU or, if such method exists, the drug will be of significant benefit to those affected by that condition.

Once authorized, orphan medicinal products are entitled to 10 years of market exclusivity in all EU Member States and in addition a range of other benefits during the development and regulatory review process including scientific assistance for study protocols, authorization through the centralized marketing authorization procedure covering all member countries and a reduction or elimination of registration and marketing authorization fees.

However, marketing authorization may be granted to a similar medicinal product with the same orphan indication during the 10-year period with the consent of the marketing authorization holder for the original orphan medicinal product or if the manufacturer of the original orphan medicinal product is unable to supply sufficient quantities.

Marketing authorization may also be granted to a similar medicinal product with the same orphan indication if this product is safer, more effective or otherwise clinically superior to the original orphan medicinal product.

The period of market exclusivity may, in addition, be reduced to six years if it can be demonstrated on the basis of available evidence that the original orphan medicinal product is sufficiently profitable not to justify maintenance of market exclusivity.

Patent Term Extensions

The European Union also provides for patent term extension through Supplementary Protection Certificates, or SPCs.

The rules and requirements for obtaining a SPC are similar to those in the United States.

An SPC may extend the term of a patent for up to five years after its originally scheduled expiration date and can provide up to a maximum of fifteen years of marketing exclusivity for a drug.

In certain circumstances, these periods may be extended for six additional months if pediatric exclusivity is obtained.

Although SPCs are available throughout the European Union, sponsors must apply on a country-by-country basis.

Similar patent term extension rights exist in certain other foreign jurisdictions outside the European Union.

Reimbursement and Pricing of Prescription Pharmaceuticals

In the EU, pricing and reimbursement schemes vary widely from country to country.

Some countries provide that products may be marketed only after a reimbursement price has been agreed.

Some countries may require the completion of additional studies that compare the cost-effectiveness of a particular product candidate to currently available therapies or so-called health technology assessments, in order to obtain reimbursement or pricing approval.

For example, EU Member States have the option to restrict the range of products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use.

EU Member States may approve a specific price for a product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the product on the market.

Other EU Member States allow companies to fix their own prices for products, but monitor and control prescription volumes and issue guidance to physicians to limit prescriptions.

Recently, many countries in the EU have increased the amount of discounts required on pharmaceuticals and these efforts could continue as countries attempt to manage health care expenditures, especially in light of the severe fiscal and debt crises experienced by many countries in the EU.

The downward pressure on health care costs in general, particularly prescription products, has become intense.

As a result, increasingly high barriers are being erected to the entry of new products.

Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained.

Reference pricing used by various EU Member States, and parallel trade, i.e., arbitrage between low-priced and high-priced EU Member States, can further reduce prices.

There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any products, if approved in those countries.

General Data Protection Regulation

Many countries outside of the United States maintain rigorous laws governing the privacy and security of personal information.

The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, and it imposes heightened requirements on companies that process health and other sensitive data, such as requiring in many situations that a company obtain the consent of the individuals to whom the sensitive personal data relate before processing such data.

Examples of obligations imposed by the GDPR on companies processing personal data that fall within the scope of the GDPR include providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, appointing a data protection officer, providing notification of data breaches, and taking certain measures when engaging third-party processors.

The GDPR also imposes strict rules on the transfer of personal data to countries outside the EEA, including the United States, and permits data protection authorities to impose large penalties for violations of the GDPR, including potential fines of up to €20 million or 4% of annual global revenues, whichever is greater.

The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR.

Compliance with the GDPR is a rigorous and time-intensive process that may increase the cost of doing business or require companies to change their business practices to ensure full compliance.

There are ongoing concerns about the ability of companies to transfer personal data from the EU to other countries.

In July 2020, the Court of Justice of the European Union, or CJEU, invalidated the EU-U.S.

Privacy Shield framework, one of the mechanisms used to legitimize the transfer of personal data from the EEA to the United States.

This CJEU decision may lead to increased scrutiny on data transfers from the EU to the United States generally and increase our costs of compliance with data privacy legislation as well as our costs of negotiating appropriate privacy and security agreements with our vendors and business partners.

Additionally, in October 2022, President Biden signed an executive order to implement the EU-U.S.

Data Privacy Framework, which would serve as a replacement to the EU-U.S.

Privacy Shield.

The EU initiated the process to adopt an adequacy decision for the EU-U.S.

Data Privacy Framework in December 2022 and the European Commission adopted the adequacy decision on July 10, 2023.

The adequacy decision permits U.S.

companies who self-certify to the EU-U.S.

Data Privacy Framework to rely on it as a valid data transfer mechanism for data transfers from the EU to the U.S.

However, some privacy advocacy groups have already suggested that they will be challenging the EU-U.S.

Data Privacy Framework.

If these challenges are successful, they may not only impact the EU-U.S.

Data Privacy Framework, but also further limit the viability of the standard contractual clauses and other data transfer mechanisms.

The uncertainty around this issue has the potential to impact our business.

As with other issues related to withdrawal of the United Kingdom from the EU, there are open questions about how personal data will be protected in the United Kingdom and whether personal information can transfer from the EU to the United Kingdom.

Following the withdrawal of the United Kingdom from the EU, the UK Data Protection Act 2018 applies to the processing of personal data that takes place in the United Kingdom and includes parallel obligations to those set forth by the GDPR.

While the Data Protection Act 2018 in the United Kingdom that “implements” and complements the GDPR has achieved Royal Assent on May 23, 2018 and is now effective in the United Kingdom, it is still unclear whether transfer of data from the EEA to the United Kingdom will remain lawful under the GDPR.

The UK government has already determined that it considers all European Union and EEA member states to be adequate for the purposes of data protection, ensuring that data flows from the United Kingdom to the European Union/EEA remain unaffected.

In addition, a recent decision from the European Commission appears to deem the United Kingdom as being “essentially adequate” for purposes of data transfer from the EU to the United Kingdom, although this decision may be re-evaluated in the future.

Beyond the GDPR, there are privacy and data security laws in a growing number of countries around the world, including Latin American countries where we plan to conduct clinical trials.

While many loosely follow the GDPR as a model, other laws contain different or conflicting provisions.

These laws will impact our ability to conduct our business activities, including both our clinical trials and any eventual sale and distribution of commercial products.

Additionally, state attorney generals (along with private plaintiffs) have brought civil actions seeking injunctions and damages resulting from alleged violations of HIPAA’s privacy and security rules.

Further, there are a number of state laws governing confidentiality and security of health information and personal information that may be applicable to our business including any new laws and regulations governing privacy and security may be adopted in the future as well.

Because of the breadth of these laws, it is possible that some of our current or future business activities, including certain clinical research, sales and marketing practices, our AI platform development, and the provision of certain items and services to our customers, could be subject to challenge under one or more of such privacy and data security laws.

The heightening compliance environment and the need to build and maintain robust and secure systems to comply with different privacy compliance and/or reporting requirements in multiple jurisdictions could increase the possibility that a healthcare company may fail to comply fully with one or more of these requirements.

agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

Human Capital

Our ability to sustain and grow our business requires us to hire, retain and develop a highly skilled workforce.

As of December 31, 2024, we had a total of 38 full-time employees.

As of December 31, 2025 and March 31, 2026, we had a total of 6 full-time employees.

As of the date of this Annual Report on Form 10-K, we have 3 full-time employees.

We continually evaluate our business needs and opportunities and balance in-house expertise and capacity with outsourced expertise and capacity.

Recruiting, motivating and retaining qualified employees is critical to our success.

We monitor our compensation programs and aim to provide our employees a competitive mix of cash compensation and medical insurance benefits, as well as the opportunity to participate in our equity programs.

We believe that our philosophy of providing competitive compensation, along with opportunities for career growth and development, encourages a high level of corporate employee tenure and low level of voluntary turnover.

A large majority of our employees have obtained advanced degrees in their professions.

Our employees are supported with training and development opportunities to pursue their careers and to ensure compliance with our policies.

None of our employees are represented by labor unions or covered by collective bargaining agreements.

We consider our relationship with our employees to be good.

Following the reduction in our employees in September 2025, we focus our human-capital objectives on (i) recruiting and retaining personnel with expertise in AI engineering and architecture, data governance and security, quality and compliance, and biotechnology informatics;

(ii) maintaining an ethical, compliance-oriented culture appropriate for companies operating in regulated life-sciences environments;

and (iii) providing role-appropriate training related to data integrity, privacy and security, and workplace safety.

We believe these measures are important to our ability to execute our strategic transition.

We also engage third-party service providers, as needed, for specialized development and regulatory support.

We value the health, safety and wellbeing of our employees and their families.

1 unchanged sentence

We were incorporated under the laws of the State of Delaware in July 2009.

On August 2, 2023, we changed our name from Kala Pharmaceuticals, Inc.

to KALA BIO, Inc.

Our website address is www.kalarx.com.

2 unchanged sentences

Available Information

Through our website, we make available free of charge our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, or the Exchange Act.

We make these reports available through our website as soon as reasonably practicable after we electronically file such reports with, or furnish such reports to, the Securities and Exchange Commission, or the SEC.

We make these reports available through our website as soon as reasonably practicable after we electronically file such reports with, or furnish such reports to the SEC.

You can review our electronically filed reports and other information that we file with the SEC on the SEC’s web site at http://www.sec.gov.

4 unchanged sentences

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

What changed 10-K

Item 1. Business