What changed in this filing

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Item 1A. Risk Factors

2021-02-25 compared with 2020-02-26 · 128 added, 53 removed, 565 unchanged (24% of the section changed)

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we may not have sufficient financial and other resources to complete the necessary clinical trials for resmetirom, including, but not limited to, our planned registrational clinical trials to obtain drug approval;

issues or adverse events, if any, when resmetirom is taken for prolonged periods such as in the treatment of NASH, dyslipidemia or any other indication;

the mechanism of action of resmetirom is complex and we do not know the degree to which it will translate into a therapeutic benefit, if any, in NASH, dyslipidemia or any other indication, and we do not know the degree to which the complex mechanism of action may contribute to long term safety issues or adverse events, if any, when resmetirom is taken for prolonged periods such as in the treatment of NASH, dyslipidemia or any other indication;

we may not be able to obtain adequate evidence from clinical trials of efficacy and safety for resmetirom in NASH, dyslipidemia or any other indication;

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Accordingly, even if we are able to obtain the requisite financing to continue to fund our development programs, we may be unable to successfully develop or commercialize resmetirom.

If we or any of our future

development partners are unable to develop, or obtain regulatory approval for, or, if approved, successfully commercialize resmetirom, we may not be able to generate sufficient revenue to continue our business.

If we or any of our future development partners are unable to develop, or obtain regulatory approval for, or, if approved, successfully commercialize resmetirom, we may not be able to generate sufficient revenue to continue our business.

Clinical trials are very expensive, time-consuming and difficult to design and implement and involve uncertain outcomes.

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We depend on enrollment of patients in our clinical trials for our product candidates.

If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

If we encounter difficulties enrolling patients in our MAESTRO-NASH clinical trial, our clinical development activities could be delayed or otherwise adversely affected.

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

We may not be able to initiate, continue, or complete clinical trials required by the FDA or foreign regulatory agencies for resmetirom if we are unable to locate and enroll a sufficient number of eligible patients to participate in these clinical trials.

We expect our Phase 3 clinical trials of resmetirom will require that we enroll significantly more patients than were enrolled in our Phase 2 trials.

Patient enrollment, a significant factor in the timing to conduct and complete clinical trials, is affected by many factors, including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials, and clinicians’ and patients’ perceptions as to the potential advantages and disadvantages of the product candidate being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating.

We may not be able to initiate, continue, or complete clinical trials required by the FDA or foreign regulatory agencies for resmetirom if we are unable to locate, enroll and maintain a sufficient number of eligible patients to participate.

Our Phase 3 clinical trials have significantly more patients than were enrolled in our Phase 2 trials.

Patient enrollment for MAESTRO-NASH is not complete as of December 31, 2020.

A significant factor in the timing to conduct and complete clinical trials, is affected by many factors, including

the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials, and clinicians’ and patients’ perceptions as to the potential advantages and disadvantages of the product candidate being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating.

For instance, we are aware that other companies conducting clinical trials in NASH patients have had delays in recruiting patients for their trials.

In the proposed clinical trials, patient willingness to undergo a liver biopsy in our NASH trials, and identification of patients willing to participate in our dyslipidemia trials, are also risk factors.

Potential patients for resmetirom may not be adequately diagnosed or identified with the diseases which we are targeting or may not meet the entry criteria for our studies.

In the MAESTRO-NASH Phase 3 trial, patients’ willingness to undergo a liver biopsy involve risk factors.

In addition, potential patients for resmetirom may not be adequately diagnosed or identified with the diseases which we are targeting or may not meet the entry criteria for our studies.

The FDA typically requires sponsors of lipid-lowering product candidates to conduct drug-drug interaction studies with statins because statins may have increased safety risks when administered together with other drug therapies that affect their pharmacokinetic profile.

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In general, drug interactions between resmetirom and statins and any other drug that might result in adverse events could delay development in later clinical trials.

We will be required to identify and enroll a sufficient number of patients for each of our planned clinical trials of resmetirom for NASH and dyslipidemia indications, respectively.

We also may encounter difficulties in identifying and enrolling NASH patients and dyslipidemia patients with a stage of disease appropriate for our future clinical trials.

We may not be able to initiate or continue clinical trials if we are unable to locate a sufficient number of eligible patients to participate in the clinical trials required by the FDA or other foreign regulatory agencies.

We will be required to identify and enroll a sufficient number of patients for our MAESTRO-NASH clinical trial.

We also may encounter difficulties in identifying and enrolling NASH patients with a stage of disease appropriate for our future clinical trials.

We may not be able to initiate or continue clinical trials if we are unable to locate and maintain a sufficient number of eligible patients to participate in the clinical trials required by the FDA or other foreign regulatory agencies.

In addition, the process of finding and diagnosing patients may prove costly.

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versions of a drug to facilitate the approval of an abbreviated new drug application or other application for generic substitutes in the United States and in nearly every pharmaceutical market around the world.

generic product is bioequivalent to our product, meaning it is absorbed in the body at the same rate and to the same extent as our product.

These manufacturers might only be required to conduct a relatively inexpensive study to show that their product has the same active ingredient(s), dosage form, strength, route of administration and conditions of use, or labeling, as our product and that the generic product is bioequivalent to our product, meaning it is absorbed in the body at the same rate and to the same extent as our product.

These generic equivalents, which must meet the same quality standards as branded pharmaceuticals, would be significantly less costly than our product to bring to market, and companies that produce generic equivalents are generally able to offer their products at lower prices.

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If any of our product candidates are approved, but fail to achieve market acceptance or such market is smaller than anticipated, we may not be able to generate significant revenue and our business would suffer.

The continuation or worsening of the COVID-19

pandemic, could affect our ability to complete our ongoing clinical trials, disrupt regulatory activities and delay or disrupt commercialization of resmetirom, and may have other adverse effects on our stock price and business operations.

pandemic has caused, and will continue to cause many governments to implement measures to slow the spread of the outbreak through quarantines, travel restrictions, heightened border security, shelter-in

place guidelines, social distancing restrictions and other measures.

This outbreak and the resulting governmental measures have had a significant impact, both direct and indirect, on businesses and commerce in the life sciences industry generally, as supply chains and manufacturing process have been disrupted;

facilities and production have been suspended;

unemployment has increased;

and demand for certain third-party goods and services, such as medical services and supplies, has spiked.

The future progression of the pandemic and its effects on our business and operations are extremely uncertain and subject to the risks described below.

We and our contract research organizations (“CROs”) and contract manufacturing organizations (“CMO”) may face disruptions that have affected and may continue to affect our ability to conduct and timely complete ongoing clinical trials including disruptions in procuring items that are essential for our development activities, such as materials and intermediates used in the manufacturing of resmetirom.

We and our CROs and CMOs, as well as clinical trial sites, have faced and may continue to face disruptions related to our ongoing clinical trials arising from staffing disruptions and limitations on our activities and the activities of our CROs and CMOs, and delays in the ability to obtain necessary institutional review board or other necessary site approvals or delays in site initiations or site monitoring visits, as well as other delays at clinical trial sites.

We may also face limitations on enrollment and patients withdrawing from our clinical trials or not complying with the protocol procedures, which could delay completion of our clinical trials or adversely affect the data generated by our clinical trials.

For instance, patient screening and enrollment has been impacted and study patients may not be able to comply with clinical trial protocols (including biopsy testing), in each case where quarantines or shelter-in-place

restrictions impede patient movement or interrupt patient demand for, or a medical facility’s delivery of, protocol-required services and procedures.

Additionally, our ability to recruit and retain patients and principal investigators and site staff who may have heightened risks if exposed to COVID-19

may adversely impact the Company’s clinical trial operations.

The response to the COVID-19

pandemic also could redirect resources with respect to regulatory and intellectual property matters in a way that could adversely impact our ability to progress regulatory approvals and protect our intellectual property.

In addition, we may face impediments to regulatory meetings and approvals due to measures that are intended to limit in-person

interactions.

The pandemic has significantly impacted economies worldwide, which could result in adverse effects on our business and operations.

Moreover, the pandemic has also caused significant disruptions in the financial markets, and may continue to cause such disruptions, which has led to increased trading volatility and significant stock price declines, particularly in the first quarter of 2020, and the pandemic or related consequences may adversely impact the future volatility and value of our stock and future trading in our stock.

In accordance with governmental pronouncements, we have instituted policies to facilitate working remotely.

The continuation of personnel working from home (not only at Madrigal, but also at CROs, CMOs, clinical sites and governmental and supervisory bodies) has negatively impacted our productivity and our business plans.

Past and future disruptions adversely impacted and could impact our business operations and/or delay necessary interactions with regulators, ethics committees, manufacturing sites, research or clinical trial sites and other important agencies and contractors, including our CROs and CMOs.

We cannot be certain what the overall impact of the COVID-19

pandemic will be on our business.

However, it has the potential to adversely affect our business, financial condition, results of operations, and prospects.

If we continue to experience delays or difficulties in the enrollment of patients in our MAESTRO-NASH trial, our receipt of necessary regulatory approvals, and the commercialization of resmetirom, could be delayed or prevented.

Our ability to complete our MAESTRO-NASH clinical trial for resmetirom as planned could be disrupted if we are unable to locate and enroll on a timely basis a sufficient number of eligible patients to participate in this trial, as required by the FDA or similar regulatory authorities outside of the United States.

The global coronavirus pandemic has presented significant challenges in the conduct of MAESTRO-NASH enrollment in 2020 and the first quarter of 2021.

Screening for MAESTRO-NASH was negatively impacted due to the outbreak of the COVID-19

pandemic, and the resulting governmental quarantine restrictions and shelter-in-place

guidelines that influenced the closing or suspension of many European and U.S.

trial sites and a decline in U.S.

patients seeking screening biopsies.

In addition, because MAESTRO-NASH is focused on specific patient populations with protocol-specified biopsy requirements, our ability to enroll eligible patients has been limited and enrollment was slower than we anticipated before the pandemic.

In the face of these challenges, we have taken steps to mitigate the delay in MAESTRO-NASH enrollment by arranging biopsy and MRI services at non-hospital

facilities near many of our site locations, increasing the number of clinical sites and enrolling patients with existing biopsies, including patients from NASH trials which were discontinued and/or in which the drug was inactive in NASH.

We believe these mitigation efforts have positioned us to accelerate enrollment growth going forward, but the pace of new enrollment ultimately will be dependent on our target study patients becoming comfortable initiating the protocol-prescribed biopsies during the COVID-19

External factors that would help accelerate MAESTRO-NASH enrollment include new or emerging developments such as:

declines in the number of new reported COVID-19

actual (or perceived) reduced risks associated with potential surges in cases or COVID-19

variant developments in the U.S.

the easing of COVID-19

governmental restrictions;

the increased ability of widely-recognized effective therapeutics, therapeutic combinations or vaccines to combat COVID-19;

and a sustained return to pre-COVID-19

daily routines, including routine on-site

work and school schedules and medical procedure scheduling in the U.S.

If the COVID-19

pandemic continues or worsens, patient recruitment and enrollment in our MAESTRO-NASH trial may be adversely affected, delayed or interrupted.

In addition, patients may choose to withdraw from our studies or we may choose to or be further required to pause enrollment and or patient dosing in our trial in order to preserve health resources and protect trial participants.

It is unknown whether or how long pauses, delays or disruptions could occur or continue.

Our ability to successfully complete MAESTRO-NASH enrollment and study objectives in the midst of the COVID-19

pandemic is subject to circumstances beyond our control and is subject to the enhanced risks and uncertainties that are described in our Risk Factors.

As we evolve from a company that is primarily involved in clinical development to a company that is also involved in commercialization, we may encounter difficulties in expanding our operations successfully.

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Maintaining third party relationships for these purposes will impose significant added responsibilities on members of our management and other personnel.

We must be able to effectively manage our development

efforts, recruit and train sales and marketing personnel, effectively manage our participation in the clinical trials in which our product candidates are involved and improve our managerial, development, operational and finance systems, all of which may impose a strain on our administrative and operational infrastructure.

We must be able to effectively manage our development efforts, recruit and train sales and marketing personnel, effectively manage our participation in the clinical trials in which our product candidates are involved and improve our managerial, development, operational and finance systems, all of which may impose a strain on our administrative and operational infrastructure.

If we enter into arrangements with third parties to perform sales, marketing or distribution services, any product revenues that we receive, or the profitability of these product revenues to us, are likely to be lower than if we were to market and sell any products that we develop without the involvement of these third parties.

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These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.

Third-party misconduct could

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

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

We have adopted a Code of Business Conduct and Ethics, but it is not always possible to identify and deter misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations.

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The loss of any member of our management team or scientific staff, including Drs.

Friedman and Taub, would impair our ability

to identify, develop and market new products.

Friedman and Taub, would impair our ability to identify, develop and market new products.

Our management and other employees may voluntarily terminate their employment with us at any time.

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Satisfying these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays.

In addition, our failure to obtain regulatory approval in any country may delay or have negative effects on the process for regulatory approval in other

In addition, our failure to obtain regulatory approval in any country may delay or have negative effects on the process for regulatory approval in other countries.

We do not have any product candidates approved for sale in any jurisdiction, including international markets, and we do not have experience in obtaining regulatory approval in international markets.

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Federal false claims, false statements and civil monetary penalties laws prohibit, among others, any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government or knowingly making, or causing to be made, a false statement to get a false claim paid.

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

The federal healthcare program Anti-Kickback Statute prohibits, among other things,

knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or in return for, purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs.

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

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Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured our product candidates or products ourselves.

For example, if we do not maintain our key manufacturing relationships, we may fail to find replacement manufacturers or develop our own manufacturing capabilities, which could delay or impair our ability to obtain regulatory approval for our products and substantially increase our costs or deplete profit margins, if any.

margins, if any.

If we do find replacement manufacturers, we may not be able to enter into agreements with them on terms and conditions favorable to us and there could be a substantial delay before new facilities could be qualified and registered with the FDA and other foreign regulatory authorities.

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While we have implemented data security measures intended to protect our information technology systems and infrastructure, there can be no assurance that such measures will successfully prevent service interruptions or data security incidents.

The Coronavirus, and/or similar outbreaks, could have a material, adverse impact on us.

An outbreak of respiratory illness caused by a new coronavirus named “2019-nCoV” (the “Coronavirus”), which was first detected in Wuhan City, Hubei Province, China, has resulted in tens of thousands of infections in China and continues to spread, including to the United States.

On January 30, 2020, the World Health Organization declared the Coronavirus outbreak a “public health emergency of international concern.” If the Coronavirus worsens in China or if the Chinese government’s efforts to contain the Coronavirus continue to restrict the movement of goods and people in China, our business activities originating from China, including our manufacturing and supply chain related activities could be adversely affected.

In addition, if the Coronavirus continues to spread outside of China, our business in general could be adversely affected.

If either of the foregoing were to occur in the future, it could materially, adversely affect our results of operations, financial condition and cash flows.

Risks Relating to Our Intellectual Property

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We must use commercially reasonable efforts to conduct clinical and commercial development programs for products containing resmetirom.

If we determine that it is not reasonable to continue clinical trials or other development of resmetirom, we may elect to cease further development and Roche may terminate the license.

determine that it is not reasonable to continue clinical trials or other development of resmetirom, we may elect to cease further development and Roche may terminate the license.

If we determine not to pursue the development or commercialization of resmetirom in certain jurisdictions, including the United States, Roche may terminate the license for such territories.

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Even if we owned and licensed patent applications covering our product candidates, the patents may not be enforced against competitors.

For example, a formulation patent will not be enforced against those making and marketing a product that has the same active pharmaceutical ingredient in a different formulation that is not claimed in the formulation patent.

For example, a formulation patent will not be enforced against those making and marketing a product that has the same

active pharmaceutical ingredient in a different formulation that is not claimed in the formulation patent.

Method-of-use

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patents and pending patent applications that cover our particular solid form, dosage, method of manufacturing, and uses of resmetirom to treat various indications are expected to expire in 2033.

Our exclusively-owned pending patent applications that cover companion diagnostics, various solid forms of resmetirom, and method of manufacturing, if issued, are expected to expire between 2037 and 2042.

While patent term adjustments or patent term extensions could result in later expiration dates for each of these patents, there can be no assurances that we will receive any patent adjustments or patent term extensions.

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In particular, under the Leahy-Smith Act, the United States transitioned in March 2013 to a “first inventor to file” system in which the first inventor to file a patent application will be entitled to the patent.

Third parties are allowed to

submit prior art before the issuance of a patent by the USPTO, and a patent may become subject to post-grant proceedings including opposition, derivation, reexamination, inter partes

Third parties are allowed to submit prior art before the issuance of a patent by the USPTO, and a patent may become subject to post-grant proceedings including opposition, derivation, reexamination, inter partes

review or interference proceedings challenging our patent rights or the patent rights of others.

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An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third party patent rights.

In addition, if the breadth or strength of protection provided by our

patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates

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

We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time consuming, and unsuccessful.

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These established companies may have a competitive advantage over us due to their size, cash resources, and greater clinical development and commercialization capabilities.

In addition, companies that perceive us to be a

competitor may be unwilling to assign or license rights to us.

In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us.

We also may be unable to license or acquire third party intellectual property rights on terms that would allow us to make an appropriate return on our investment.

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Because we rely on third parties to research and develop and to manufacture our product candidates, we must, at times, share trade secrets with them.

We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, consulting agreements or other similar agreements with our advisors, employees, third party contractors and consultants prior to beginning research or disclosing proprietary information.

We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if

applicable, material transfer agreements, consulting agreements or other similar agreements with our advisors, employees, third party contractors and consultants prior to beginning research or disclosing proprietary information.

These agreements typically limit the rights of the third parties to use or disclose our confidential information, including our trade secrets.

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In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names.

Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not

be able to compete effectively and our business may be adversely affected.

Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected.

Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely impact our financial condition or results of operations.

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the effect of competing technological and market developments.

the costs associated with operating as a public company.

Some of these factors are outside of our control.

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Historically, the market price of our common stock has fluctuated over a wide range, and it is likely that the price of our common stock will continue to be volatile in the future.

The market price of our common stock could be impacted due to a variety of factors, including, in addition to global and industry-wide events:

the losses we may incur;

The closing price of our common stock has ranged from $60.13 to $133.70 per share during the period from January 1, 2020 to December 31, 2020.

The market price of our common stock could be impacted due to a variety of factors, including:

global market or financial developments (whether due to the COVID pandemic or otherwise);

US market events (including the potential for unusual market trading activity following external short interest developments or social media activity, such as those that have impacted certain stocks such as AMC Entertainment Holdings, Inc.

and GameStop Corp.

in the first quarter of 2021, and which in any case generally would be beyond our control);

industry-wide events;

and the following events or developments:

the losses we may incur, including increased losses resulting from costs associated with increases in our clinical trial activity;

developments in patent or other proprietary rights owned or licensed by us, our collaborative partners or our competitors;

public concern as to the safety and efficacy of products developed by us or others;

the progress and results of our clinical trials;

public concern as to the safety and efficacy of products developed by us or others or public safety generally (whether due to the COVID pandemic or otherwise);

In addition, due to one or more of the foregoing factors in one or more future quarters, our results of operations may fall below the expectations of securities analysts and investors.

In that event, the market price of our common stock could materially decline.

In the event any of the foregoing occur, the market price of our common stock could be highly volatile and may materially decline.

A small number of our stockholders own a substantial amount of our outstanding common stock and may be deemed to have substantial control over us;

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We expect that significant additional capital will be needed in the future to continue our planned operations.

We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time.

In November 2020 we established a new “at-the-market”

(“ATM”) program in the amount of $200 million under which we may, from time to time, issue and sell shares of our common stock to or through a sales agent up to established limits.

To the extent we raise additional capital by issuing equity securities, through the ATM program or otherwise, our stockholders may experience substantial dilution.

If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales.

Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders.

Please see Note 6 within the Consolidated Financial Statements of this Annual Report on Form 10-K

for sales of our common stock under the ATM program.

We expect that significant additional capital will be needed in the future to continue our planned operations.

To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution.

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Sales of a significant number of shares of our common stock in the public markets or significant short sales of our common stock, or the perception that such sales could occur, could depress the market price of our common stock and impair our ability to raise capital.

As of December 31, 2019, there were:

1,969,797 shares of Series A Convertible Preferred stock outstanding, all of which were readily convertible into a like number of shares of our common stock at the option of the holders (the “Common Shares Underlying Our Preferred Stock”);

an additional 1,461,987 shares of our common stock issuable upon the exercise of outstanding stock options (the “Common Shares Underlying Our Stock

and 4,177,854 shares of our common stock (the “Bay City Capital Holdings”) held by our largest stockholder, Bay City Capital LLC (“Bay City”).

The Bay City Capital Holdings represent approximately 27% of our outstanding common as of December 31, 2019, and are capable of being sold directly (by Bay City) or indirectly (following any future distribution of Bay City Capital Holdings by Bay City to its partners), and any material sale of such shares could significantly reduce the market price of our common stock and impair our ability to raise adequate capital.

The Common Shares Underlying Our Preferred Stock (assuming the full conversion of all currently outstanding preferred shares), the Common Shares Underlying Our Stock Options (assuming the complete exercise of all outstanding stock options) and the Bay City Capital Holdings represent 40.3% of our common stock on an as converted basis.

Sales of a substantial number of any of such shares of our common stock or other equity-related securities in the public markets, could depress the market price of our common stock.

As of December 31, 2020, there were a number of investors or investor groups that held a significant beneficial ownership interest in our common stock, including:

2,733,100 shares of our common stock (the “Bay City Affiliate Holdings”) beneficially owned by Dr.

Fred Craves, our Lead Director, which includes 2,310,521 shares beneficially owned by Bay City Capital LLC (“Bay City”);

1,969,797 shares of outstanding Series A Convertible Preferred stock, a common stock equivalent with no voting rights, that is convertible into shares of Common Stock on a 1-for-1

basis only to the extent that after giving effect to such conversion the holders thereof and their affiliates and any persons who are members of a Section 13(d) group with the holders or their affiliates would beneficially own (in the aggregate, for purposes of Rule 13d-3

under the Exchange Act) no more than 4.99% of the outstanding Common Stock (the “Beneficial Ownership Limitation”);

and 1,837,540 shares of our common stock issuable upon the exercise of outstanding stock options under our 2015 Stock Plan, as amended (the “Common Shares Underlying Our Stock Options”).

The Bay City Affiliate Holdings represent approximately 17.6% of our outstanding common stock as of December 31, 2020, and are capable of being sold directly (including by Bay City or its affiliated funds) or indirectly (following any future distribution to Bay City from affiliated funds or by Bay City to its partners), and any material sale of such shares could significantly reduce the market price of our common stock and impair our ability to raise adequate capital.

As of December 31, 2020, the 1,969,797 Common Shares Underlying Our Preferred Stock (disregarding the Beneficial Ownership Limitation and assuming the full conversion of all currently outstanding preferred shares) owned by entities affiliated with Baker Bros.

Advisors LP and 1,499,213 additional shares of common stock directly owned by entities affiliated with Baker Bros.

Advisors LP collectively represented 19.9% of our common stock on an as converted, fully-converted basis (the “Baker Bros.

Fully Converted Interest”).

In addition, we have six institutional investors who have filed Schedule 13Gs (or amendments) reflecting collective beneficial ownership, as of December 31, 2020, of approximately 43% of our outstanding common stock (“Our Other Shares Beneficially Owned by Institutional Investors”).

Sales of a substantial number of shares of our common stock by one or more of the investors of groups listed above (such as the Common Shares Underlying Our Stock Options, the Bay City Affiliate Holdings, the Baker Bros.

Fully Converted Interest or Our Other Shares Beneficially Owned by Institutional Investors) or other equity-related securities in the public markets, could depress the market price of our common stock.

If there are significant sales or short sales of our stock, the price decline that could result from this activity may cause the share price to decline further, which, in turn, may cause long holders of the common stock to sell their shares, thereby contributing to sales of common stock in the market.

Such sales also may impair our ability to raise capital through the sale of additional shares in the future at a time and price that our management deems acceptable, if at all.

See “Risk Factors;

Risks Relating to Ownership of Our Common Stock —

The price of our common stock has been, and may continue to be, volatile .

Such sales or short sales also may impair our ability to raise capital through the sale of additional shares in the future at a time and price that our management deems acceptable, if at all.

We do not anticipate paying cash dividends on our common stock, and accordingly, stockholders must rely on stock appreciation for any return on their investment.

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

What changed 10-K

Item 1A. Risk Factors