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Item 1A. Risk Factors

2024-02-28 compared with 2023-02-23 · 283 added, 180 removed, 510 unchanged (48% of the section changed)

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Because of the numerous risks and uncertainties associated with developing and commercializing our product candidates, we are unable to predict the extent of any future losses or when we will become profitable, if at all.

Our business depends on the success of resmetirom, which is still in clinical development and has not completed a pivotal trial.

Our business depends on the success of resmetirom.

If we are unable to obtain regulatory approval for and successfully commercialize resmetirom, or we experience significant delays in doing so, our business will be materially harmed.

The primary focus of our product development since mid- 2018 has been resmetirom, a liver-directed selective thyroid hormone receptor beta agonist for potential use in non-alcoholic steatohepatitis, or NASH.

Successful continued development and ultimate regulatory approval of resmetirom for NASH is critical to the future success of our business.

We have invested, and will continue to invest, a significant portion of our time and financial resources in the clinical development of resmetirom.

We will need to raise sufficient funds to successfully complete our clinical development program for resmetirom in NASH.

The future regulatory and commercial success of resmetirom is subject to a number of risks, including the following:

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;

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 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 or any other indication;

delay or inability to reach agreement with the FDA or comparable foreign regulatory authorities on acceptable clinical trial design;

regulators, IRBs or ethics committees may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;

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

The primary focus of our product development since mid-2018 has been resmetirom for potential use in non-alcoholic steatohepatitis, or NASH.

Successful regulatory approval of resmetirom for NASH is critical to the future success of our business.

We have invested, and will continue to invest, a significant portion of our time and financial resources in the clinical and commercial development of resmetirom.

The future success of resmetirom is subject to a number of risks, including the following:

• a delay, or inability to reach agreement with the FDA, concerning approval of resmetirom;

• regulators, IRBs or ethics committees may not authorize us or our investigators to continue to conduct ongoing trials or complete a clinical trial;

• we may not be able to demonstrate or obtain adequate evidence from clinical trials of efficacy and safety for resmetirom;

• we do not know the degree to which resmetirom will be accepted as a therapy by physicians, patients and payors, even if approved;

in our clinical programs for resmetirom, we may experience variability in patients, adjustments to clinical trial procedures and the need for additional clinical trial sites, which could delay our clinical trial progress;

the results of our clinical trials may not meet the level of statistical or clinical significance required by the FDA or comparable foreign regulatory bodies for marketing approval;

patients in our clinical trials may die or suffer other adverse effects for reasons that may or may not be related to resmetirom, which could delay or prevent further clinical development;

the standards implemented by clinical or regulatory agencies may change at any time;

we cannot be certain what efficacy endpoints clinical or regulatory agencies may require in a Phase 3 clinical trial of NASH or for approval of our product candidates;

we also cannot be certain if we will be able to gain Subpart H approval of any of our product candidates based on surrogate endpoints;

foreign clinical or regulatory agencies may require efficacy and safety endpoints for Phase 3 clinical trials that may not be favorable to us and different from the results we have observed to date in our current trials;

other differences in the design of our ongoing and planned Phase 3 clinical trials of the treatment of NASH, including the use of a new tablet formulation of resmetirom and/or the inclusion of patients with more advanced NASH, could cause the results of our Phase 3 trials to be less favorable than the results we observed in our Phase 2 trials in NASH;

if we obtain Subpart H approval of resmetirom based on a surrogate endpoint, consistent with our ongoing Phase 3 trial, we will be required to conduct a post-approval clinical outcomes trial under conditions set by FDA to confirm the clinical benefit of the product candidate and if the post-approval trial is not successful we may not be able to continue marketing the product;

we cannot be certain of the number and type of clinical trials and non-clinical studies that FDA or other regulatory agencies will require in order to approve resmetirom for NASH;

if approved for NASH, resmetirom will likely compete with the off-label use of currently marketed products and other therapies in development that may reach approval for NASH prior to resmetirom;

we may not be able to obtain, maintain or enforce our patents and other intellectual property rights.

• commercial execution risks;

• patients in our clinical trials may die or suffer other adverse effects for reasons that may or may not be related to resmetirom, which could delay or prevent clinical development;

• we cannot be certain if we will be able to gain full approval of our product candidate following any Subpart H approval based on surrogate endpoints;

• even if we obtain Subpart H approval of resmetirom based on a surrogate endpoint, we are required to conduct complete the clinical outcomes trial under conditions set by FDA to confirm the clinical

benefit of the product candidate and if the post-approval trial is not successful we may not be able to continue marketing the product.

We could also encounter delays if a clinical trial is placed on clinical hold, suspended or terminated by us, the IRBs of the institutions in which such trials are being conducted, or the FDA, the competent authorities and/or ethics committees of the EU Member States or other regulatory authorities, if a clinical trial is recommended for suspension or termination by the Data Safety Monitoring Board, or DSMB, for such trial, or on account of changes to federal, state, or local laws.

A suspension or termination may be imposed due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols,

inspection of the clinical trial operations or trial site by the FDA, EMA, competent authorities and/or ethics committees of the EU Member States or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product or treatment, failure to establish or achieve clinically meaningful trial endpoints, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

Further, the FDA, EMA or other regulatory authorities may disagree with our clinical trial design and our interpretation of data from clinical trials, or may change the requirements for approval even after they have reviewed and commented on the design for our clinical trials.

Our product development costs will increase if we experience delays in clinical testing or marketing approvals.

We do not know whether any of our clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all.

Significant clinical trial delays could also shorten any periods during which we may have the exclusive right to commercialize our product candidates and may allow our competitors to bring products to market before we do, potentially impairing our ability to successfully commercialize our product candidates and harming our business and results of operations.

A suspension or termination may be imposed due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA, EMA, competent authorities and/or ethics committees of the EU Member States or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a product or treatment, failure to establish or achieve clinically meaningful trial endpoints, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

Many of the factors that cause, or lead to, a delay in the completion of clinical trials may also ultimately lead to the adverse regulatory action.

Further, the FDA, EMA or other regulatory authorities may disagree with our clinical trial design for ingoing trials and our interpretation of data from clinical trials, or may change the requirements for approval even after they have reviewed and commented on the design for our clinical trials.

Any delays in our clinical development programs may harm our business, financial condition and results of operations significantly.

Of the large number of drugs in development in the pharmaceutical industry, only a small percentage results in the submission of a new drug application, or NDA, to the FDA and even fewer are approved for commercialization.

Furthermore, even if we do receive regulatory approval to market resmetirom, any such approval may be subject to limitations on the indicated uses or patient populations for which we may market the products.

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

If approved, we will be highly dependent on the commercial success of resmetirom.

We may not be able to meet expectations with respect to sales of our products if approved by the FDA, or attain profitability and positive cash-flow from operations.

We have received breakthrough therapy designation and priority review from the FDA for resmetirom for the treatment of patients with NASH with liver fibrosis, and FDA has assigned a Prescription Drug User Fee Act date for resmetirom of March 14, 2024, the target date by which the FDA intends to complete its review and take action on the NDA.

If resmetirom receives FDA approval, the success of our business will depend on the commercial success of resmetirom.

Successful commercialization of resmetirom, if approved, is subject to many risks.

We have never, as an organization, launched or commercialized any other product, and there is no guarantee that we will be able to successfully commercialize resmetirom if approved.

There are numerous examples of failures to meet high expectations of market potential, including by pharmaceutical companies with more experience and resources than us.

We expect that future commercial success of resmetirom for the treatment of patients with NASH will depend on many factors, including the following:

• the efficacy, cost, approved use, and side-effect profile of resmetirom relative to competitive treatment regimens, if approved, for the treatment of NASH;

• if approved for NASH, resmetirom may compete with the off-label use of currently marketed products and other therapies in development that may in the future obtain approval for NASH;

• the effectiveness of our commercial strategy for the marketing of resmetirom, including our pricing strategy and the effectiveness of our efforts to obtain adequate third-party reimbursements;

• developing, maintaining and successfully monitoring commercial manufacturing arrangements for resmetirom with third-party manufacturers to ensure they meet our standards and those of regulatory authorities, including the FDA, which extensively regulate and monitor pharmaceutical manufacturing facilities;

• our ability to negotiate and enter into any additional commercial, supply and distribution contracts to support commercialization efforts, and to hire and manage additional qualified personnel;

• our ability to meet the demand for commercial supplies of resmetirom at acceptable costs;

• the acceptance of resmetirom by physicians, patients and third-party payors;

• our ability to remain compliant with laws and regulations that apply to us and our commercial activities;

• the actual market-size, ability to identify targeted patients and the demographics of patients eligible for resmetirom, which may be different than what we currently expect;

• the occurrence of any side effects, adverse reactions or misuse, or any unfavorable publicity in these areas;

• our ability to obtain, maintain or enforce our patents and other intellectual property rights;

• the effect of recent or potential health care legislation in the United States.

While we believe that resmetirom for the treatment of NASH, if approved, should have a commercially competitive profile, we cannot accurately predict the amount of time needed to attain a commercially successful profile or the amount of revenue that would be generated from the sale of resmetirom.

If we do not effectively commercialize resmetirom, we will not be able to execute our business plan and may not be able to achieve profitability.

If our revenues, market share and/or other indicators of market acceptance of resmetirom do not meet the expectations of investors or public market analysts, the market price of our common stock would likely decline.

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

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In addition, success in early clinical trials does not mean that later clinical trials will be successful, because later-stage clinical trials may be conducted in broader patient populations and involve different study designs.

For instance, our Phase 1 results and our Phase 2 primary endpoint results in NASH may not be predictive of any future results in any Phase 3 clinical trial in NASH.

Furthermore, our ongoing and future trials will need to demonstrate sufficient safety and efficacy in large patient populations for approval by regulatory authorities.

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

Although we have satisfied Subpart H patient enrollment for MAESTRO-NASH, clinical enrollment is not complete as of December 31, 2022 and significant additional enrollment will be necessary and will be ongoing for some time.

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 MAESTRO-NASH Phase 3 trial, patients’ willingness to undergo a liver biopsy involves 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.

In addition, 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.

We have completed two Phase 1 clinical drug interaction studies of resmetirom and statins in 39 normal healthy volunteers, which showed resmetirom to have a favorable safety profile and to be well-tolerated.

We have completed a Phase 2 clinical trial in NASH including patients taking low dose statins.

We have also completed a Phase 2 clinical trial in HeFH including patients taking high dose statins.

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 our clinical trials.

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 (or as may be required) by the FDA or other foreign regulatory agencies.

In addition, the process of finding and diagnosing patients is costly and may prove more costly in the future.

Our inability to enroll a sufficient number of patients for any of our clinical trials could result in significant delays or may require us to abandon one or more clinical trials.

Although we have satisfied Subpart H patient enrollment for MAESTRO-NASH, clinical enrollment for our MAESTRO-NASH Outcomes trial is not complete as of December 31, 2023 and significant additional enrollment will be necessary and will be ongoing for some time.

Any product candidate in our current or future clinical trials may cause unacceptable adverse events or side effects or have other properties that may delay or prevent its regulatory approval or commercialization or limit its commercial potential.

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In addition, the FDA may withdraw Fast Track Designation if it believes that the designation is no longer supported by data from our clinical development program.

Breakthrough therapy or priority review by the FDA for any product candidate may not lead to faster development, regulatory review or approval processes, and it does not increase the likelihood that our product candidates will receive marketing approval.

We have received breakthrough therapy designation and priority review from the FDA for resmetirom for the treatment of patients with NASH with liver fibrosis, and we may seek breakthrough therapy designation or priority review for future product candidates if supported by the results of clinical trials.

A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, where preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.

Priority review is intended to speed the FDA marketing application review timeframe for drugs that treat a serious condition and, if approved, would provide a significant improvement in safety or effectiveness.

For drugs and biologics that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development.

Sponsors of drugs that are breakthrough therapies may also be able to submit marketing applications on a rolling basis, meaning that the FDA may review portions of a marketing application before the sponsor submits the complete application to the FDA, if the sponsor pays the user fee upon submission of the first portion of the marketing application.

For applications that receive priority review, the FDA's marketing application review goal is shortened to six months, as opposed to ten months under standard review.

Designation as a breakthrough therapy or priority review product is within the discretion of the regulatory agency.

Accordingly, even if we believe one of our future product candidates meets the criteria for designation as a breakthrough therapy or priority review product, the agency may disagree and instead determine not to make such designation.

In any event, the receipt of such a designation for a product candidate may not result in a faster development process, review or approval compared to drugs considered for approval under conventional regulatory procedures and does not assure ultimate marketing approval by the agency.

In addition, regarding breakthrough therapies, the FDA may later decide that the products no longer meet the conditions for qualification as a breakthrough therapy or, for priority review products, decide that the period for FDA review or approval will not be shortened.

Even if resmetirom or any product candidate receives accelerated approval from the FDA, they face future post-approval development and regulatory requirements, which present additional challenges for us to successfully navigate.

We are currently pursuing accelerated approval of our lead product candidate, resmetirom.

Under the accelerated approval pathway, continued approval may be contingent upon verification of a clinical benefit in confirmatory trials.

These post-approval requirements and commitments may not be feasible and/or could impose significant burdens and costs on us;

could negatively impact our development, manufacturing and supply of our products;

and could negatively impact our financial results.

Drugs granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditional approval.

Failure to meet post-approval commitments and requirements, including completion of enrollment of—and in particular, any failure to obtain positive data from—any confirmatory studies required by the FDA, could result in negative regulatory action from the FDA and/or withdrawal of such accelerated approval.

The recently enacted FDORA has expanded FDA's expedited withdrawal procedures for drugs approved through the accelerated approval pathway if a sponsor fails to conduct any required post-approval study with due diligence.

Unless otherwise informed by the FDA, an applicant must submit to the FDA for consideration during the preapproval review period copies of all promotional materials, including promotional labeling as well as advertisements, intended for dissemination or publication within 120 days following marketing approval.

After 120 days following marketing approval, unless otherwise informed by the FDA, the applicant must submit promotional materials at least 30 days prior to the intended time of initial dissemination of the labeling or initial publication of the advertisement.

If we or the manufacturing facilities for our products fail to comply with applicable regulatory requirements, the FDA may, among other actions:

issue warning letters or untitled letters;

seek an injunction or impose civil or criminal penalties or monetary fines;

suspend or withdraw or alter the conditions of our marketing approval;

suspend any ongoing clinical trials;

refuse to approve pending applications or supplements to applications submitted by us;

suspend or impose restrictions on operations, including costly new manufacturing requirements;

and seize or detain products, refuse to permit the import or export of products or require us to initiate a product recall.

Our product candidates will remain subject to ongoing regulatory review even if they receive marketing approval, and if we fail to comply with continuing regulations, we could lose these approvals and the sale of any approved commercial products could be suspended.

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• civil or criminal penalties;

• injunctions;

• product seizures or detentions;

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Agency regulations and other applicable regulations and policies provide incentives to manufacturers to create modified, non-infringing 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.

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 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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Competition that our or any of our partners’ products may face from generic versions of our products could materially and adversely impact our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on the investments we have made in those product candidates.

If physicians and patients do not accept our future products or if the market for indications for which any product candidate is approved is smaller than expected, we may be unable to generate significant revenue, if any.

Even if any of our product candidates obtain regulatory approval, they may not gain market acceptance among physicians, patients, and third-party payers.

Efforts to educate the medical community and third-party payers on the benefits of our product candidates may require significant resources and may not be successful.

Resmetirom has only been studied in a limited number of patients.

Following commercial launch, if approved, resmetirom will be available to a much larger number of patients, and we do not know whether the results of resmetirom’s use in such larger number of patients will be consistent with the results from our clinical studies.

Resmetirom has been administered only to a relatively limited number of patients in clinical studies.

While the FDA may grant accelerated approval of resmetirom based on the data included in the NDA, we do not know whether future results, when a large number of patients are exposed to resmetirom including results related to safety and efficacy, will be consistent with the results from earlier clinical studies of resmetirom that served as the basis for the approval of resmetirom.

New data relating to resmetirom, including from adverse event reports, our post-marketing commitments in the United States, and from other ongoing clinical studies, may result in changes to the product label and may adversely affect sales, or result in withdrawal of resmetirom from the market.

The FDA and regulatory authorities in other jurisdictions may also consider the new data in reviewing resmetirom’s marketing applications for additional indications and/or in other

jurisdictions, or impose post-approval requirements.

If any of these actions were to occur, it could result in significant expense and delay or limit our ability to generate sales revenues.

If payers excessively restrict our future products or physicians and patients do not accept our future products or if the market for indications for which any product candidate is approved is smaller than expected, our ability to generate revenues will be impacted.

Even if any of our product candidates obtain regulatory approval, they may not gain extensive market acceptance among physicians, patients, and third-party payers.

Efforts to educate the medical community and third-party payers on the benefits of our product candidates may require significant resources and may not be fully successful.

If any of our product candidates do not achieve an adequate level of acceptance, we may not generate significant product revenue or any profits from operations.

Physicians may decide not to recommend our treatments for a variety of reasons including:

Physicians may decide not to recommend our treatments or a patient though prescribed our product may not receive it for a variety of reasons including:

• timing of market introduction of competitive products;

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• convenience and ease of administration;

prevalence and severity of adverse side effects;

• restrictions in the label of the drug;

• other potential advantages of alternative treatment methods;

• unanticipated post-marketing events;

• ineffective marketing and distribution support of its products;

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.

As we advance our product candidates through clinical trials, we will need to expand our development, regulatory, manufacturing, and marketing and sales capabilities and may need to further contract with third parties to provide these capabilities.

• inability of third-party patient services to achieve patient access to therapy;

• inability of specialty pharmacies to communicate effectively with patients, coordinate shipments and effect adherence to therapy.

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

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, including successfully optimizing manufacturing for our product/product candidate in sufficient quality and quantity or within targeted timelines.

As we have been advancing resmetirom through clinical trials, we have been expanding our development, regulatory, manufacturing, and marketing and sales capabilities and commitments and may need to further contract with third parties to provide these capabilities.

As our operations expand, we likely will need to manage additional relationships with such third parties, as well as additional collaborators, distributors, marketers and suppliers.

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.

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.

We must be able to effectively manage our development efforts, and marketing personnel, effectively manage our participation in ongoing clinical trials 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 (such as ex-US arrangements or arrangements described in the succeeding section) 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.

In addition, we may not be successful in entering into arrangements with third parties to sell and market our products or in doing so on terms that are favorable to us.

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If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our products.

The uncertainty associated with pharmaceutical reimbursement and related matters may adversely affect our business.

If we are unable to successfully further develop and maintain internal commercialization capabilities, future sales of our products, if approved, may be negatively impacted.

In anticipation of potential regulatory approval of resmetirom, we have been hiring and training a commercial team and developing the organizational infrastructure we believe we need to support the commercial success of resmetirom.

Factors that may inhibit our efforts to maintain and further develop commercial capabilities include:

• an inability to retain an adequate number of effective commercial personnel;

• an inability to adequately train commercial personnel, who may have limited experience with our company or our products, to deliver a consistent message regarding our products and be effective in educating physicians on how to prescribe our products;

• an inability to equip commercial field personnel with compliant and effective materials, including marketing literature to help them educate physicians and our healthcare providers regarding our products and their proper administration and educate payors on the safety, efficacy and effectiveness profile of our products to support favorable coverage decisions;

• unforeseen costs and expenses associated with maintaining and further developing an independent commercial organization.

If we are not successful in maintaining an effective commercial infrastructure, we will encounter difficulty in achieving, maintaining or increasing projected sales of resmetirom once approved, which would adversely affect our business and financial position.

In addition, we may in the future choose to collaborate with third parties that have direct sales forces and established distribution systems, either to augment our own sales force and distribution systems or as an alternative to our own sales force and distribution systems.

To the extent that we enter into co-promotion or other licensing arrangements, our product revenue may be lower than if we directly marketed or sold any approved products.

In addition, any revenue we receive will depend in whole or in part upon the efforts of these third parties, which may not be successful and are generally not within our control.

If we are unable to enter into these arrangements on acceptable terms or at all, we may not be able to successfully commercialize any approved products.

If we are not successful in commercializing any approved products, either on our own or through collaborations with one or more third parties, our future product revenue will suffer and we may incur significant additional losses.

The insurance coverage and reimbursement status of newly-approved products is uncertain.

Failure to obtain or maintain adequate coverage and reimbursement for new or current products could limit our ability to market those products and decrease our ability to generate revenue.

Market acceptance and sales of any one or more of our product candidates will depend on reimbursement policies and may be affected by future healthcare reform measures in the United States and in foreign jurisdictions.

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If reimbursement is not available or is available on a limited basis, we may not be able to successfully commercialize any product candidates that we develop.

In the United States, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, also called the Medicare Modernization Act, or MMA, changed the way Medicare covers and pays for pharmaceutical products.

The legislation established Medicare Part D, which expanded Medicare coverage for outpatient prescription drug purchases by the elderly but provided authority for limiting the number of drugs that will be covered in any therapeutic class.

The future pricing, coverage and reimbursement of our product candidates must be adequate to support our commercial infrastructure.

Our future per-patient prices must be sufficient to recover our development and manufacturing costs and potentially achieve profitability.

However, sales of any pharmaceutical product depend, in part, on the extent to which such product will be covered by third-party payors, such as federal, state, and foreign government healthcare programs, commercial insurance and managed healthcare organizations, and the level of reimbursement for such product by third-party payors.

Significant uncertainty exists as to the coverage and reimbursement status of any newly approved product.

Decisions regarding the extent of coverage and amount of reimbursement to be provided are made on a plan-by-plan basis.

One third-party payor’s decision to cover a product does not ensure that other payors will also provide coverage for the product.

As a result, we do not have assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance or in the future.

In addition, third-party payors have increasingly reduced reimbursements for pharmaceutical products.

government and state legislatures have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement, and requirements for substitution of generic products.

Third-party payors are increasingly challenging the prices charged, examining the medical necessity, and reviewing the cost effectiveness of pharmaceutical products, in addition to questioning their safety and efficacy.

Increasingly, third-party payors are requiring

that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products.

Further, such payors are increasingly challenging the price, examining the medical necessity and reviewing the cost effectiveness of medical product candidates.

Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit or delay sales of any of our future products.

A decision by a third-party payor not to cover a product could reduce physician ordering and patient demand for any of our future products.

In international markets, reimbursement and healthcare payment are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in the European Union, Canada and other countries will put pressure on the pricing and usage of our product candidates.

In many countries, the prices of medicinal products are subject to varying price control mechanisms as part of national health systems.

In general, the prices of therapeutics or medicinal products under such systems are substantially lower than in the U.S.

For example, the European Union provides options for its member states to restrict the range of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use.

Furthermore, there is no assurance that a product will be considered medically reasonable and necessary for a specific indication, will be considered cost-effective by third-party payors, that an adequate level of reimbursement will be established even if coverage is available, or that the third-party payors’ reimbursement policies will not adversely affect the ability of manufacturers to sell products profitably.

Accordingly, in markets outside the U.S., the reimbursement for our products may be reduced compared with the U.S.

and may be insufficient to generate commercially reasonable revenue and profits.

The pricing of pharmaceutical products has come under increasing scrutiny as part of a global trend toward healthcare cost containment.

Resulting changes in healthcare law and policy, including recently enacted changes to Medicare, may impact our business in ways that we cannot currently predict, which could have a material adverse effect on our business and financial condition.

The United States and several foreign jurisdictions are considering, or have already enacted, a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our products profitably.

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We expect to experience pricing pressures in connection with the sale of any products that we develop due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, and additional legislative proposals.

In March 2010, the Patient Protection and Affordable Care Act, as amended, (the ACA) became law in the United States.

The goal of the ACA is to reduce the cost of healthcare and substantially change the way healthcare is financed by both government and private insurers.

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, also called the Medicare Modernization Act, or MMA, changed the way Medicare covers and pays for pharmaceutical products.

The Patient Protection and Affordable Care Act, as amended, (the ACA) aims to reduce the cost of healthcare and substantially change the way healthcare is financed by both government and private insurers.

The ACA may result in downward pressure on pharmaceutical reimbursement, which could negatively affect market acceptance of, and the price we may charge for, any products we develop that receives regulatory approval.

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We expect that the ACA, its implementation, efforts to challenge or modify the ACA or its implementing regulations, or portions thereof, and other healthcare reform measures including those that may be adopted in the future, could have a material adverse effect on our industry generally and on our ability to maintain or increase sales of existing products or to successfully commercialize product candidates, if approved.

On August 16, 2022, President Biden signed into law the IRA, which, among other things, establishes Medicare Part B and Part D inflation rebate schemes.

In addition to the ACA, U.S.

governments continue to seek to adopt healthcare policies and reforms intended to curb healthcare costs, such as federal or state controls on payment for drugs (including under Medicare, Medicaid, and commercial health plans).

The Inflation Reduction Act of 2022, or IRA, among other things, establishes Medicare Part B and Part D inflation rebate schemes.

Failure to timely pay a Part B or Part D inflation rebate is subject to a civil monetary penalty.

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The IRA further makes changes to the Medicare Part D benefit, including a limit on annual out-of-pocket costs, and a change in manufacturer liability under a new discount program which could negatively affect the profitability of our product candidates.

Failure to pay a discount under this new program will be subject to a civil monetary penalty.

Failure to pay a

discount under this new program will be subject to a civil monetary penalty.

Congress continues to examine various policy proposals that may result in pressure on the prices of prescription drugs in the government health benefit programs.

The IRA or other legislative changes could impact the market conditions for our product candidate.

government and state legislatures have shown significant interest in implementing cost containment programs to limit the growth of government-paid health care costs, including price controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs.

Additionally, there have been several Congressional inquiries and proposed and enacted federal and state legislation and regulatory initiatives designed to, among other things, bring more transparency to product pricing, evaluate the relationship between pricing and manufacturer patient programs, and reform government healthcare program reimbursement methodologies for drug products.

Individual states in the U.S.

have also increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including by requiring pharmaceutical manufacturers to report to state agencies when they introduce new drugs to market with prices over a certain threshold, or when they increase the price of a drug over a certain threshold.

If healthcare policies or reforms intended to curb healthcare costs are adopted, the prices that we charge for any approved products may be limited, our commercial opportunity may be limited and/or our revenues from sales of our product and any future products, if approved, may be negatively impacted.

It is possible that the above-mentioned measures, as currently enacted or may be amended in the future, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, and new payment methodologies and additional downward pressure on coverage and payment and the price that we receive for any approved product.

Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors.

The implementation of additional cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our products.

We cannot be sure whether additional legislative changes will be enacted in the U.S.

or outside of the U.S., or whether regulatory changes, guidance or interpretations will be changed, or what the impact of such changes on our product candidates, if any, may be.

If we fail to comply with our reporting and payment obligations under the Medicaid Drug Rebate program or other governmental pricing programs after we begin participating in these programs, we could be subject to additional rebate requirements, penalties, or other sanctions, which could have a material adverse effect on our business, financial condition, results of operations, and growth prospects.

Under the Medicaid Drug Rebate program, a participating manufacturer is required to pay a rebate to each state Medicaid program for its covered outpatient drugs that are dispensed to Medicaid beneficiaries and paid for by the state Medicaid program as a condition of having federal funds being made available for drugs under Medicaid and Medicare Part B.

Those rebates are based on pricing data reported by the manufacturer on a monthly and quarterly basis to CMS.

These data include the average manufacturer price and, in the case of innovator products, the best price for each drug, which, in general, represents the lowest price available from the manufacturer to any wholesaler, retailer, provider, health maintenance organization, nonprofit entity, or governmental entity in the U.S.

in any pricing structure, calculated to include all sales and associated rebates, discounts, and other price concessions.

If we fail to pay the required rebate amount or report pricing data on a timely basis, we may be subject to civil monetary penalties and/or termination from the Medicaid Drug Rebate program.

Additionally, civil monetary penalties can be applied if we are found to have knowingly submitted any false price or product information to the government, if we fail to submit the required price data on a timely basis, or if we misclassify or misreport product information.

CMS could also decide to terminate our Medicaid drug rebate agreement, in which case federal payments may not be available under Medicaid or Medicare Part B for our covered outpatient drugs.

The ACA (addressed further above in the section on “-- U.S.

Healthcare Reform”) made significant changes to the Medicaid Drug Rebate Program, and CMS issued a final regulation to implement the changes to the Medicaid Drug Rebate Program under the ACA.

CMS also issued a final regulation that modified prior Medicaid Drug Rebate Program regulations to permit reporting multiple best price figures with regard to value based purchasing arrangements;

and provide definitions for “line extension,” “new formulation,” and related terms, with the practical effect of expanding the scope of drugs considered to be line extensions that are subject to an alternative rebate formula.

Our failure to comply with these price reporting and rebate payment options, as well as pharmaceutical benefit manager “accumulator” programs, could negatively impact our financial results.

Federal law requires that a manufacturer also participate in the 340B Drug Pricing program in order for federal funds to be available for the manufacturer’s drugs under Medicaid and Medicare Part B.

The 340B program requires participating manufacturers to agree to charge no more than the 340B “ceiling price” for the manufacturer’s covered outpatient drugs to a specified “covered entities,” including community health centers and other entities that receive certain federal grants, as well as hospitals that serve a disproportionate share of low-income patients.

The 340B ceiling price is calculated using a

statutory formula, which is based on the average manufacturer price and rebate amount for the covered outpatient drug as calculated under the Medicaid Drug Rebate Program.

If we are found to have knowingly and intentionally charged 340B covered entities more than the statutorily mandated ceiling price, we could be subject to significant civil monetary penalties and/or such failure also could be grounds for HRSA to terminate our agreement to participate in the 340B program, in which case our covered outpatient drugs would no longer be eligible for federal payment under the Medicaid or Medicare Part B program.

Further, the IRA established a Medicare Part D inflation rebate scheme and a drug price negotiation program, with the first negotiated prices to take effect in 2026.

It also makes several changes to the Medicare Part D benefit, including the creation of a new manufacturer discount program in place of the current coverage gap discount program (beginning in 2025).

Manufacturers may be subject to civil monetary penalties for certain violations of the negotiation and inflation rebate provisions and an excise tax during a noncompliance period under the negotiation program.

Drug manufacturers may also be subject to civil monetary penalties with respect to their compliance with the new Part D manufacturer drug discount program.

Pricing and rebate calculations are complex, vary across products and programs, and are often subject to interpretation by the manufacturer, governmental agencies, and courts.

A manufacturer that becomes aware that its Medicaid reporting for a prior quarter was incorrect, or has changed as a result of recalculation of the pricing data, is obligated to resubmit corrected data up to three years after those data originally were due.

Restatements and recalculations increase the costs for complying with the laws and policies governing the Medicaid Drug Rebate program and could result in an overage or underage in our rebate liability for past quarters.

They also may affect the 340B ceiling price and therefore liability under the 340B program.

Finally, in order to be eligible to have its products paid for with federal funds under the Medicaid and Medicare Part B programs and purchased by the Department of Veterans Affairs (“VA”), Department of Defense (“DoD”), Public Health Service, and Coast Guard (the “Big Four agencies”) and certain federal grantees, a manufacturer is required to participate in the VA Federal Supply Schedule (“FSS”) pricing program, established under Section 603 of the Veterans Health Care Act of 1992.

Under this program, the manufacturer is obligated to make its covered drugs available for procurement on an FSS contract and charge a price to the Big Four agencies that is no higher than the Federal Ceiling Price (“FCP”), which is a price calculated pursuant to a statutory formula.

The FCP is derived from a calculated price point called the “non-federal average manufacturer price” (“Non FAMP”), which the manufacturer calculates and reports to the VA on a quarterly and annual basis.

Pursuant to applicable law, knowing provision of false information in connection with a Non FAMP filing can subject a manufacturer to significant penalties for each item of false information.

The FSS contract also contains extensive disclosure and certification requirements.

If we overcharge the government in connection with the FSS contract or Tricare Retail Pharmacy Rebate Program, whether due to a misstated FCP or otherwise, we will be required to refund the difference to the government.

Failure to make necessary disclosures and/or to identify contract overcharges can result in allegations against us under the False Claims Act and other laws and regulations.

Unexpected refunds to the government, and any response to government investigation or enforcement action, would be expensive and time-consuming, and could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Under Section 703 of the National Defense Authorization Act, a manufacturer is required to pay quarterly rebates to DoD on utilization of its innovator products that are dispensed through DoD’s Tricare network pharmacies to Tricare beneficiaries.

The rebates are calculated as the difference between the annual Non FAMP and FCP for the calendar year that the product was dispensed.

A manufacturer that overcharges the government in connection with the FSS contract or Tricare Retail Pharmacy Rebate Program, whether due to a misstated FCP or otherwise, is required to refund the difference to the government.

Failure to make necessary disclosures and/or to identify contract overcharges can result in allegations against us under the False Claims Act and other laws and regulations.

If any product liability lawsuits are successfully brought against us or any of our collaborative partners, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.

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If we fail to develop and commercialize other product candidates, we may be unable to grow our business.

Although the development and commercialization of resmetirom is our primary focus, as part of our longer-term growth strategy, we plan to evaluate the development and commercialization of other therapies related to thyroid hormone, orphan and other diseases.

We will evaluate internal opportunities from our compound libraries, and also may choose to in-license or acquire other product candidates as well as commercial products to treat patients suffering from thyroid hormone, orphan or other disorders with high unmet medical needs and limited treatment options.

We will evaluate internal opportunities from our compound libraries, and also may choose to in-license or acquire other product candidates as well as commercial products to treat patients suffering from disorders with high unmet medical needs and limited treatment options.

These other product candidates may require additional, time-consuming development efforts prior to commercial sale, including preclinical studies, clinical trials and approval by the FDA and/or applicable foreign regulatory authorities.

All product candidates are prone to the risks of failure that are inherent in pharmaceutical product development, including the possibility that the product candidate will not be shown to be sufficiently safe and effective for approval by regulatory authorities.

In addition, we cannot assure you that

any such products that are approved will be manufactured or produced economically, be successfully commercialized, be widely accepted in the marketplace, or be more effective than other commercially available alternatives.

If we lose key management personnel, or if we fail to recruit additional highly skilled personnel, our ability to identify, develop and commercialize products will be impaired.

We are highly dependent on principal members of our management team, including our Chief Executive Officer, Paul A.

Friedman, M.D., and our President, Research and Development, and Chief Medical Officer, Rebecca Taub, M.D.

In addition, we cannot assure you that any such products that are approved will be manufactured or produced economically, be successfully commercialized, be widely accepted in the marketplace, or be more effective than other commercially available alternatives.

If we lose key senior management personnel, it could have a material adverse effect on our business and stock price.

We are highly dependent on principal members of our senior management team, including our President and Chief Executive Officer, Bill Sibold, and our President, Research and Development and Chief Medical Officer, Rebecca Taub, M.D.

These executives each have significant pharmaceutical industry experience.

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.

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

Sibold or Dr.

Taub, could have a material adverse effect on our business and stock price.

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

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We may be unable to recruit such personnel on a timely basis, if at all, which would negatively impact our development and commercialization programs.

Additionally, we do not currently maintain “key person” life insurance on the lives of our executives or any of our employees.

This lack of insurance means that we may not receive adequate compensation for the loss of the services of these individuals.

We currently do not have significant marketing, sales or distribution infrastructure with respect to our product candidates.

If we are unable to fully develop our sales, marketing and distribution capabilities on our own or through collaborations with marketing partners, we will not be successful in commercializing our product candidates.

We currently do not have significant marketing, sales or distribution capabilities and have limited sales or marketing experience within our organization.

If our lead product candidate, resmetirom, is approved, we intend to establish a sales and marketing organization with technical expertise and supporting distribution capabilities to commercialize resmetirom in the United States, and to license or outsource this function to a third party or third parties outside of the United States.

Either of these options would be expensive and time-consuming.

Some or all of these costs may be incurred in advance of any approval of resmetirom.

In addition, we may not be able to hire a sales force in the United States that is sufficient in size or has adequate expertise in the medical markets that we intend to target.

Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely affect the commercialization of resmetirom and other future product candidates.

With respect to our existing and future product candidates, we may choose to collaborate with third parties that have direct sales forces and established distribution systems, either to augment our own sales force and distribution systems or as an alternative to our own sales force and distribution systems.

To the extent that we enter into co-promotion or other licensing arrangements, our product revenue may be lower than if we directly marketed or sold any approved products.

In addition, any revenue we receive will depend in whole or in part upon the efforts of these third parties, which may not be successful and are generally not within our control.

If we are unable to enter into these arrangements on acceptable terms or at all, we may not be able to successfully commercialize any approved products.

Even if we obtain FDA approval of resmetirom or any other future product candidate, we may never obtain approval or commercialize our products outside of the United States, which would limit our ability to realize their full market potential.

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The Hatch-Waxman Amendments permit a patent term extension of up to five years for a patent covering an approved product as compensation for effective patent term lost during product development and the FDA regulatory review process.

However, we may not receive an extension if we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements.

However, we may not receive an extension if we fail to apply within applicable deadlines, fail to apply prior to expiration

of relevant patents or otherwise fail to satisfy applicable requirements.

Moreover, the length of the extension could be less than we request.

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Further, if this occurs, our competitors may take advantage of our investment in development and trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case.

We may fail to obtain orphan drug designations from the FDA for our product candidates, as applicable, and even if we obtain such designations, we may be unable to maintain the benefits associated with orphan drug designation, including the potential for market exclusivity.

Our strategy includes filing for orphan drug designation where available for our product candidates.

Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug or biologic intended to treat a rare disease or condition, which is defined as one occurring in a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug or biologic will be recovered from sales in the United States.

In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers.

In addition, if a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications, including a full NDA, to market the same drug or biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or where the manufacturer is unable to assure sufficient product quantity.

We have not obtained orphan designation for any product candidates to date, although we believe some of the potential indications of our product candidates could qualify for orphan drug designation and the related benefits if approved for such indications and we may file for orphan drug designation with respect to such indications.

Even if we obtain such designations, we may not be the first to obtain regulatory approval of a product candidate for the orphan-designated indication due to the uncertainties associated with developing pharmaceutical products.

In addition, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request for designation was materially defective or if we are unable to assure sufficient quantities of the product to meet the needs of patients with the orphan-designated disease or condition.

Further, even if we obtain orphan drug designation exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties may be approved for the same condition, and only the first applicant to receive approval will receive the benefits of marketing exclusivity.

Even after an orphan-designated product is approved, the FDA can subsequently approve a later drug with the same active moiety for the same condition if the FDA concludes that the later drug is clinically superior if it is shown to be safer, more effective or makes a major contribution to patient care.

Orphan drug designation neither shortens the development time or regulatory review time of a drug, nor gives the drug any advantage in the regulatory review or approval process.

In addition, while we may seek orphan drug designation for our product candidates, we may never receive such designations.

Failure to obtain an orphan drug designation for our product candidates may have a material adverse effect on our business, results of operations and financial condition.

If we or our partners market products in a manner that violates fraud and abuse and other healthcare laws, or if we or our partners violate government price reporting laws, we or our partners may be subject to administrative civil and/or criminal penalties.

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providing free trips, free goods, sham consulting fees and grants and other monetary benefits to prescribers;

reporting to pricing services average prices that are then used by federal programs to set reimbursement rates, rebates, and discounts;

inaccurately reporting to pricing services average prices that are then used by federal programs to set reimbursement rates, rebates, and discounts;

engaging in off-label promotion;

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Under Section 703 of the National Defense Authorization Act for FY 2008, the manufacturer is required to pay quarterly rebates to DoD on utilization of its innovator products that are dispensed through DoD’s Tricare network pharmacies to Tricare beneficiaries.

Ensuring that our internal operations and future business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs.

Ensuring that our internal operations and

future business arrangements with third parties comply with applicable healthcare laws and regulations will involve substantial costs.

It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations, agency guidance or case law involving applicable fraud and abuse or other healthcare laws and regulations.

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Our current and anticipated future dependence upon others for the manufacture of our product candidates may adversely affect our future profit margins and our ability to develop our product candidates and commercialize any products that receive regulatory approval on a timely basis.

Our internal computer systems, or those of our third-party collaborators, service providers, contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our development programs and have a material adverse effect on our reputation, business, financial condition or results of operations.

Our internal computer systems and those of our current or future third-party collaborators, service providers, contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.

A failure of our information technology infrastructure and cybersecurity threats may adversely affect our business and operations.

Our information technology infrastructure is subject to threats from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.

In addition, the information technology systems of our current or future third-party collaborators, service providers, contractors and consultants are subject to similar threats, and we depend in part on third-party security measures over which we do not have full control to protect against data security incidents.

Attacks on information technology systems are increasing in their frequency, levels of persistence, sophistication and intensity, and they are being conducted by increasingly sophisticated and organized groups and individuals with a wide range of motives and expertise.

In addition to extracting sensitive information, such attacks could include the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information.

The prevalent use of mobile devices also increases the risk of data security incidents.

While we have not experienced any material system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations or the operations of third-party collaborators, service providers, contractors and consultants, it could result in a material disruption of our development programs and significant reputational, financial, legal, regulatory, business or

operational harm.

For example, the loss of clinical trial data for our product candidates could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

In addition to potentially extracting sensitive information, such as trade secrets or other intellectual property, such attacks could include the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means, including ransom demands, to affect service reliability and/or threaten the confidentiality, integrity and availability of information.

Such an event could result in a material disruption of our operations or development programs and/or produce significant reputational, financial, legal, regulatory, business or operational harm.

For example, any loss of clinical trial data could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

To the extent that any disruption or security breach results in a loss of or damage to our data or applications or other data or applications relating to our technology or product candidates, or inappropriate disclosure of confidential or proprietary information, we could incur liabilities and the further development of our product candidates could be delayed.

In addition, our liability insurance may not be sufficient in type or amount to cover us against claims related to security breaches, cyberattacks and other related breaches.

Any failure or perceived failure by us or any third-party collaborators, service providers, contractors or consultants to comply with our privacy, confidentiality, data security or similar obligations to third parties, or any data security incidents or other security breaches that result in the unauthorized access, release or transfer of sensitive information, including personally identifiable information, may result in governmental investigations, enforcement actions, regulatory fines, litigation or public statements against us, could cause third parties to lose trust in us or could result in claims by third parties asserting that we have breached our privacy, confidentiality, data security or similar obligations, any of which could have a material adverse effect on our reputation, business, financial condition or results of operations.

Moreover, data security incidents and other security breaches can be difficult to detect, and any delay in identifying them may lead to increased harm.

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 that could adversely affect our business.

We have been subject to a cybersecurity attack in the past.

Although we have taken steps to enhance our cybersecurity protections and minimize the impact of any future event, we cannot provide any assurances that future cyber events will not occur, that these security safeguards will be successful, and that future cyber events, to the extent they occur, will not impact our operations or have any material adverse impact on our business.

As a result, we may not in the future successfully prevent service interruptions, exfiltrations or data security incidents that could materially adversely affect our business.

In addition, insurance may not cover or be sufficient in type or amount to cover us against claims related cyber incidents.

governmental investigations, litigation, regulatory enforcement actions, fines, sanctions or other penalties, injunctive relief requiring costly compliance measures, required notification and credit monitoring, public statements against us, third parties to lose trust in us, or claims by third parties asserting that we have breached our privacy, confidentiality, data security or similar obligations, any of which could have a material adverse effect on our reputation, business, financial condition or results of operations.

Moreover, data security incidents and other cybersecurity attacks can be difficult to detect, and any delay in identifying them may lead to increased harm.

Failure to comply with health and data protection laws and regulations could lead to government enforcement actions (which could include civil or criminal penalties), private litigation and/or adverse publicity, and could negatively affect our operating results and business.

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In addition, California voters approved the California Privacy Rights Act (“CPRA”) ballot initiative which introduced significant amendments to the CCPA and established and funded a dedicated California privacy regulator, the California Privacy Protection Agency (“CPPA”).

The amendments introduced by the CPRA went into effect on January 1, 2023, and new implementing regulations are expected to be introduced by the CPPA.

The amendments introduced by the CPRA went into effect on January 1, 2023, and implementing regulations continue to be introduced by the CPPA.

Failure to comply with the CCPA may result in, among other things, significant civil penalties and injunctive relief, or statutory or actual damages.

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These claims may result in significant liability and damages.

Virginia and Colorado also adopted laws, effective January 1, 2023, and July 1, 2023, respectively, introducing new privacy obligations for which we may need to take additional steps to comply.

Similarly, there are a number of legislative proposals in the United States, at both the federal and state level, that could impose new obligations or limitations in the area of consumer protection.

For example, Utah and Connecticut have enacted privacy laws similar to the CCPA that impose new obligations or limitations in areas affecting our business.

Virginia and Colorado also have enacted similar laws that impose new privacy obligations for which we may need to take additional steps to comply.

Similarly, there are a number of legislative proposals in the United States, at both the federal and state level, that could impose new obligations or

limitations in the area of consumer protection.

For example, Utah, Indiana, Iowa, Tennessee, Washington, and Utah, and Connecticut have enacted privacy laws similar to the CCPA that impose new obligations or limitations in areas affecting our business.

These laws and regulations are evolving and may impose limitations on our business activities.

The obligations to comply with new privacy laws may require us, among other things, to update our notices and develop new processes internally and with our third-party collaborators, service providers, contractors or consultants to facilitate consumer rights requests, and such laws may impose restrictions on our processing of personal information that may impact the way we operate our business.

We may be subject to fines,

penalties, or private actions in the event of non-compliance with such laws.

We may be subject to fines, penalties, or private actions in the event of non-compliance with such laws.

The CCPA, the CPRA or other domestic privacy and data protection laws and regulations may increase our compliance costs and potential liability.

European data collection is governed by restrictive regulations governing the use, processing and cross-border transfer of personal information.

Outside the United States, our clinical trial programs and operations implicate international data protection laws, including the EU General Data Protection Regulation 2016/679 (“GDPR”).

Outside the United States, our clinical trial programs and operations implicate international data protection laws, including the EU General Data Protection Regulation including as implemented in the UK (collectively, “GDPR”).

The GDPR increases our responsibility and liability in relation to the processing of personal data of individuals located in the EU.

The GDPR, together with the national legislation of the EU member states governing the processing of personal data, impose strict obligations and restrictions on the ability to collect, analyze and transfer personal data, including health data and samples from clinical trials and adverse event reporting.

In particular, these obligations and restrictions concern the consent of the individuals to whom the personal data relates, the processing details disclosed to the individuals, the sharing of personal data with third parties, the transfer of personal data out of the EU, security breach notifications, as well as substantial potential fines for violations of the data protection obligations.

The GDPR, together with the national legislation of the EU member states governing the processing of personal data, places certain obligations on the processing of such personal data including ensuring the lawfulness of processing personal data, health data and samples from clinical trials and adverse event reporting.

In particular, these obligations and restrictions concern the consent of the individuals to whom the personal data relates where applicable, the processing details disclosed to the individuals, the sharing of personal data with third parties, the transfer of personal data out of the EU, security breach notifications, as well as substantial potential fines for violations of the data protection obligations.

Specifically regarding the transfer of personal data outside of the EU, while there are legal mechanisms available to lawfully transfer personal data outside of the EU, including to the United States, there are certain unsettled legal issues regarding such data transfers, the resolution of which may adversely affect our ability to transfer personal data or otherwise may cause us to incur significant costs to come into compliance with applicable data transfer impact assessments and implementation of legal data transfer mechanisms.

On July 16, 2020, the European Court of Justice ruled the EU-US Privacy Shield to be an invalid data transfer mechanism and confirmed that the Model Clauses remain valid, and in June 2021, the European Commission published updated versions of the Model Clauses, which must be incorporated into new and existing agreements within prescribed timeframes in order to continue to lawfully transfer personal data outside of the EU.

Data protection authorities from the different EU member states, as well as in the United Kingdom and Switzerland, have promulgated national privacy laws that impose additional requirements, which add to the complexity of processing and transferring EU personal data, with the United Kingdom and Switzerland following the EU with the publication of new Model Clauses to be incorporated in all applicable contracts within a specified timeframe in order to legitimize data transfers from those jurisdictions.

Data protection authorities from the different European member states, as well as in the United Kingdom and Switzerland, have promulgated national privacy laws that impose additional requirements, which add to the complexity of processing and transferring EU personal data, with the United Kingdom and Switzerland following the EU with the publication of new Model Clauses to be incorporated in all applicable contracts within a specified timeframe in order to legitimize data transfers from those jurisdictions.

The UK adopted versions of their Model Clauses during 2022.

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The draft decision concludes that the United States ensures an adequate level of protection for personal data transferred from the EU to U.S.

After an approval process, the European Commission is expected to adopt the final adequacy decision, which will allow data to flow freely from the EU to the U.S.

After an approval process, the European Commission is expected to adopt the final adequacy decision, which will allow data to flow freely from the EU to the U.S between companies certified under the new framework.

Risks Relating to Our Intellectual Property

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Pursuant to the terms of the Roche Agreement, we assumed control of all development and commercialization of resmetirom and hold exclusive worldwide rights for all potential indications.

Under the Roche Agreement, Roche exclusively licensed certain patent rights and know-how relating to resmetirom in exchange for consideration consisting of an upfront payment, milestone payments tied to the achievement of product development and regulatory milestones, and royalty payments based

on net sales of products containing resmetirom or another licensed product, subject to certain reductions.

The Roche Agreement will expire, unless earlier terminated pursuant to other provisions thereof, on the last to occur of (i) the expiration of the last valid claim of a licensed patent covering the manufacture, use or sale of products containing resmetirom, or (ii) ten years after the first sale of a product containing resmetirom.

containing resmetirom.

Under the Roche Agreement, Roche controls prosecution of the licensed patent rights, although we have a right to comment.

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This failure to properly protect the intellectual property rights relating to our product candidates could have a material adverse effect on our financial condition and results of operations.

While we have licensed rights to issued patents in the United

States and other jurisdictions for resmetirom, we cannot be certain that the claims in issued patents will not be found invalid or unenforceable if challenged.

While we have licensed rights to issued patents in the United States and other jurisdictions for resmetirom, we cannot be certain that the claims in issued patents will not be found invalid or unenforceable if challenged.

We cannot be certain that the claims in owned and licensed patent applications covering our product candidates will be considered patentable by the United States Patent and Trademark Office, or USPTO, and valid by courts in the United States or by the patent offices and courts in foreign jurisdictions.

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This type of patent may not be enforced against competitors making and marketing a product that has the same active pharmaceutical ingredient but is used for a method not claimed in the patent.

Moreover, even if competitors do not actively promote their product for our targeted indications, physicians may prescribe these products “off-label.” Although off-label prescriptions may infringe or contribute to the infringement of method-of-use patents, the practice is common and such infringement is difficult to prevent or prosecute.

Moreover, even if competitors do not actively promote their product for our targeted indications, physicians may prescribe these products “off-label.” Although off-label prescriptions

may infringe or contribute to the infringement of method-of-use patents, the practice is common and such infringement is difficult to prevent or prosecute.

Our composition-of-matter patent licensed from Roche relating to resmetirom is scheduled to expire in the United States in 2026.

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Moreover, third parties may come upon this or similar information lawfully and independently.

We would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us.

have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us.

Further, intellectual property rights have limitations and do not necessarily address all potential threats to our competitive position.

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Because patent applications are maintained in secrecy until the application is published, we may be unaware of third party patents that may be infringed by commercialization of resmetirom or our other product candidates.

Moreover, because patent applications can

take many years to issue, there may be currently-pending patent applications that may later result in issued patents that our product candidates may infringe.

Moreover, because patent applications can take many years to issue, there may be currently-pending patent applications that may later result in issued patents that our product candidates may infringe.

In addition, identification of third party patent rights that may be relevant to our technology is difficult because patent searching is imperfect due to differences in terminology among patents, incomplete databases and the difficulty in assessing the meaning of patent claims.

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Moreover, we may be subject to a third party preissuance submission of prior art to the USPTO or in addition to interference proceedings, may become involved in opposition, derivation, reexamination, inter partes review, post-grant review or other post-grant proceedings challenging our patent rights or the patent rights of others.

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.

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

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Third parties may also raise similar claims before the USPTO, even outside the context of litigation.

The outcome following legal assertions of invalidity and

unenforceability is unpredictable.

The outcome following legal assertions of invalidity and unenforceability is unpredictable.

With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art of which we and the patent examiner were unaware during prosecution.

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Consequently, we may not be able to prevent third parties from practicing their inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions.

Competitors may

use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection but enforcement is not as strong as that in the United States.

Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection but enforcement is not as strong as that in the United States.

These products may compete with resmetirom, and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions.

The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally.

The legal systems of certain countries, particularly certain developing countries, do not favor the

enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally.

Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us.

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If we fail to obtain the capital necessary to fund all of our planned operations, we may be unable to successfully develop and commercialize resmetirom and other future product candidates.

Although we believe that our existing cash and cash equivalents will be sufficient to fund our current operations through at least the next 12 months, we will require additional working capital in order to complete the remaining clinical development primarily for resmetirom and potentially for other product candidates through potential regulatory approval and through potential commercialization of these product candidates.

We expect our spending levels overall to increase in connection with our clinical trials of resmetirom as well as other corporate activities.

The amount and timing of any expenditure needed to implement our development and commercialization programs will depend on numerous factors, including:

the type, number, scope, progress, expansion costs, results of and timing of our future clinical trials and projected product label or the need for additional clinical trials of resmetirom for NASH and dyslipidemia or any of our other product candidates which we are pursuing or may choose to pursue in the future;

We expect our overall spending levels to increase.

The amount and timing of any expenditure needed to fund our development and commercialization programs will depend on numerous factors, including:

• the type, number, scope, progress, expansion costs, results of and timing of our ongoing and future clinical trials and projected product label or the need for additional clinical trials ;

• the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights;

the costs and timing of obtaining regulatory approval for resmetirom for NASH and any of our other potential product candidates;

the costs and timing of obtaining or maintaining manufacturing for resmetirom for NASH and any of our other product candidates, including commercial manufacturing if any product candidate is approved;

the costs and timing of establishing sales, marketing and reimbursement capabilities and enhanced internal controls over financial reporting;

• the timing of obtaining regulatory approval for resmetirom for NASH and any potential future product candidates;

• the costs and timing of obtaining or maintaining manufacturing for resmetirom for NASH, including commercial manufacturing if such product candidate is approved;

• the costs and timing of establishing and initiating sales, marketing and reimbursement capabilities and enhanced internal controls over financial and compliance reporting requirements;

• the terms and timing of establishing and maintaining collaborations, license agreements and other partnerships, including for ex-US resmetirom opportunities;

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Some of these factors are outside of our control.

Our existing capital resources may not be sufficient to enable us to fund the completion of all planned clinical trials and commercialization objectives for our product

These and other circumstances may cause us to delay certain research activities and related clinical expenses, but such delays will not alter our need to raise additional funding.

As a result, we will need to raise substantial additional funds in the future.

We have not sold any products, and we do not expect to sell or derive revenue from any product sales for the foreseeable future.

We have not sold any products prior to the filing of this Form 10-K, and we cannot estimate the amounts of any revenue from any product sales, if approved, in the future.

We may seek additional funding through future debt and equity financings, as well as potential additional collaborations or strategic partnerships with other companies or through non-dilutive financings.

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In addition, market perception that we need to issue additional shares, the issuance of additional shares by us, or the possibility of such issuance, may cause the market price of our shares to decline.

If we are unable to obtain additional funding on a timely basis, we may need to delay certain aspects of, or be unable to complete, planned clinical trials for resmetirom for NASH and our other product candidates, and we may be required to significantly curtail some or all of our activities.

If we are unable to obtain additional funding on a timely basis, our business may be materially and adversely affected.

We also could be required to seek funds through arrangements with collaborative partners or otherwise that may require us to relinquish rights to our product candidates or otherwise agree to terms unfavorable to us.

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Similar rules may apply under state tax laws.

We have not performed a detailed analysis to determine whether an ownership change under Section 382 of the Code, or similar state provisions, has previously occurred.

performed a detailed analysis to determine whether an ownership change under Section 382 of the Code, or similar state provisions, has previously occurred.

As a result, if we earn net taxable income, our ability to use our pre-change net operating loss carryforwards to offset U.S.

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On May 6, 2022, we and our subsidiary, Canticle Pharmaceuticals, Inc.

(“Canticle”) entered into a Loan and Security Agreement with Hercules, as amended on February 3, 2023 (as amended, the “Loan Agreement”), providing for an aggregate of $250.0 million in term loans that will be available to us in four tranches subject to the conditions set forth in the Loan Agreement (collectively, the “Term Loans”).

(“Canticle”) entered into a Loan and Security Agreement with Hercules Capital, Inc.

(“Hercules”), as amended on February 3, 2023 (as amended, the “Loan Agreement”), providing for an aggregate of $250.0 million in term loans that will be available to us in four tranches subject to the conditions set forth in the Loan Agreement (collectively, the “Term Loans”).

Our obligations under the Loan Agreement are secured by a security interest in substantially all of our assets, other than intellectual property.

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Additionally, the Loan Agreement contains affirmative and restrictive financial covenants commencing on January 1, 2023, including maintenance of a minimum cash, cash equivalents and liquid funds covenant of $35.0 million, which may decrease in certain circumstances if the Company achieves both a certain FDA approval for resmetirom and a revenue milestone (the “Minimum Cash Covenant”).

The Loan Agreement also includes a revenue-based covenant (the “Revenue Covenant”) that could apply commencing at or after the

time that financial reporting is due for the quarter ending September 30, 2024;

The Loan Agreement also includes a revenue-based covenant (the “Revenue Covenant”) that could apply commencing at or after the time that financial reporting is due for the quarter ending September 30, 2024;

however, the Revenue Covenant will be waived at any time in which the Company maintains, as measured monthly (i) a certain level of cash, cash equivalents and liquid funds relative to outstanding Hercules debt or (ii) a market capitalization of at least $1.2 billion.

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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 closing price of our common stock has ranged from $55.89 to $296.54 per share during the period from January 1, 2022 to January 31, 2023.

The closing price of our common stock has ranged from $58.39 to $312.00 per share during the period from December 1, 2022 to January 31, 2024.

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

global market or financial developments;

prevailing macroeconomic conditions, including potential recession or economic downturns;

macroeconomic conditions, including potential recession or economic downturns;

US market events (including the potential for unusual market trading activity following external short interest developments or social media activity);

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

• litigation.

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 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;

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

therefore, your ability to influence corporate matters may be limited.

Certain stockholders affiliated and associated with our officers and directors collectively own approximately 21.9% of our outstanding common stock as of December 31, 2022 and acting together, may have the ability to substantially affect matters submitted to our stockholders for approval.

Certain stockholders affiliated and associated with our officers and directors collectively beneficially own approximately 24.24% of our outstanding common stock as of December 31, 2023 and acting together, may have the ability to substantially affect matters submitted to our stockholders for approval.

This concentration of ownership may have the effect of delaying, deferring or preventing a strategic transaction, even if such a transaction would benefit other stockholders.

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

Funds affiliated with Baker Bros.

Advisors LP hold a significant portion of our total outstanding shares of common stock (including shares of our common stock issuable upon conversion of shares of our Series A Convertible Preferred Stock and Series B Convertible Preferred Stock and pre-funded warrants), and any sale of such shares into the market,

or perception that sales could occur, in the future could cause the market price of our common stock to drop significantly.

Based on a Schedule 13D/A filed with the SEC on November 17, 2023, 667, L.P.

and Baker Brothers Life Sciences, L.P., funds affiliated with Baker Bros.

Advisors LP ("Baker Bros."), reported an ownership interest in (i) Madrigal common stock and (ii) other Madrigal securities with limitations on conversion or exercise to common stock.

If such limitations did not exist, Baker Bros.

would be deemed to beneficially own 5,851,323 shares of our common stock (which includes 1,969,797 shares of common stock issuable upon the conversion of our Series A Convertible Preferred Stock and 400,000 shares of common stock issuable upon the conversion of our Series B Convertible Preferred Stock, each of which are common stock equivalents with no voting rights, that are 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, which may be increased or decreased up to 19.99% at the holder’s election on 61 days’ notice and certain limitations (the “Beneficial Ownership Limitation”).

The 5,851,323 total share number above includes 1,648,098 pre-funded warrants and without such limitations on conversion or exercise would represent approximately 24.49% of our total outstanding shares of common stock as of December 31, 2023 on a fully as-converted and as-exercised to common stock basis.

The pre-funded warrants are only exercisable to the extent that after giving effect to such exercise the holders thereof, together with their affiliates and any members of a Section 13(d) group with such holders, would beneficially own, for purposes of Rule 13d-3 under the Exchange Act, no more than 9.99% of the outstanding shares of Common Stock (the “Maximum Percentage”).

By written notice to us, holders of the pre-funded warrants may from time to time increase or decrease the Maximum Percentage to any other percentage not in excess of 19.99%.

Sales of a substantial number of shares of our common stock in the public market by Baker Bros., or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities.

We are unable to predict the effect that sales by Baker Bros., or any perception that sales may occur, may have on the prevailing market price of our common stock.

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, 2022, there were a number of investors or investor groups that held a significant beneficial ownership interest in our common stock, including:

2,049,629 shares of our outstanding common stock

(the “Bay City Affiliate Holdings”) beneficially owned by Dr.

Fred Craves, our Lead Director, which includes 1,511,782 shares beneficially owned by Bay City Capital LLC (“Bay City”);

2,119,603 shares of our outstanding common stock beneficially owned by Drs.

Paul Friedman and Becky Taub (the “Friedman/Taub Holdings”), our Chairman and Chief Executive Officer and President of R&D and Chief Medical Officer, respectively;

1,969,797 shares of outstanding Series A Convertible Preferred stock and 400,000 shares of outstanding Series B Convertible Preferred Stock (collectively, the “Common Shares Underlying Our Preferred Stock”), each of which are common stock equivalents with no voting rights, that are 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, subject to adjustment with 61 days’ notice and certain limitations (the “Beneficial Ownership Limitation”);

and 2,857,054 shares of our common stock issuable upon the exercise of outstanding stock options under our 2015 Stock Plan, as amended and 14,899 shares of our common stock issuable upon the exercise of outstanding vested warrants held by our creditors (the “Common Shares Underlying Our Stock Options and Warrants”).

In addition, there are other institutional investors who from time to time file Schedule 13Gs (or amendments thereto) or Form 13Fs reflecting substantial beneficial ownership of outstanding common stock (“Our Other Shares Beneficially Owned by Institutional Investors”).

The Bay City Affiliate Holdings and the Friedman/Taub Holdings collectively represent beneficial ownership of approximately 21.9% of our outstanding common stock as of December 31, 2022, 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, to Bay City fund limited partners, 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, 2022, the 2,369,797 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 1,545,113 additional shares of common stock directly owned by entities affiliated with Baker Bros.

Advisors LP collectively represented beneficial ownership of approximately 19.1% of our common stock on an as converted basis (the “Baker Bros.

Fully Converted Interest”).

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

Fully Converted Interest, the Common Shares Underlying Our Stock Options and Warrants and 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.

As of December 31, 2023, there were a number of investors or investor groups that held a significant beneficial ownership interest in our common stock.

Paul Friedman and Becky Taub (the “Friedman/Taub Holdings”), a director and President of R&D and Chief Medical Officer, respectively collectively beneficially own 2,212,070 shares (or 10.62%) of our common stock.

Based on a Schedule 13D/A filed with the SEC on November 17, 2023, funds affiliated with Baker Bros.

Advisors LP beneficially owned (for SEC reporting purposes) 9.99% of our common stock and maintained an ownership interest in up to 5,851,323 shares of our common stock subject to exercise or conversion limits such as the Beneficial Ownership Limitation and Maximum Percentage (the “Baker Bros.

Holdings”), as described in the preceding paragraph.

Based on a Schedule 13G/A filed with the SEC on February 14, 2024, funds affiliated with Avoro Capital Advisors LLC (the “Avoro Holdings”) reported beneficial ownership of 2,288,888 shares of our Common Stock, including pre-funded warrants to purchase 400,000 shares of Common Stock that are subject to the Maximum Percentage.

In addition, as of December 31, 2023, there are:

2,881,896 shares of our common stock issuable upon the exercise of outstanding stock options or the vesting of restricted stock units and performance stock units under our 2015 Stock Plan, as amended and 2023 Inducement Plan;

pre-funded warrants to purchase shares of Common Stock pursuant to outstanding pre-funded warrants as described above;

and 19,454 shares of our common stock issuable upon the exercise of outstanding vested warrants held by our creditors consisting of Hercules and affiliates.

In addition, there are other institutional investors (including funds affiliated with Janus Henderson Group plc, which reported beneficial ownership of 2,902,050 shares of our common stock, or 14.7%, in a Schedule 13G/A filed with the SEC on February 13, 2024) who from time to time file Schedule 13Gs (or amendments thereto) or Form 13Fs reflecting substantial beneficial ownership of outstanding common stock.

Sales of a substantial number of shares of our common stock by one or more of the investors or groups listed above or other equity-related securities in the public markets, could depress the market price of our common stock and impair our ability to raise capital.

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.

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Investors seeking cash dividends should not invest in our common stock.

Unresolved Staff Comments

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