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Item 1A. Risk Factors

2023-03-20 compared with 2022-03-01 · 311 added, 237 removed, 866 unchanged (39% of the section changed)

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These risks include, but are not limited to, the following:

• We may not be successful in identifying and implementing any strategic transaction and any strategic transactions that we may consummate in the future may not be successful.

If we are able to complete any such transaction, it may not result in additional value to stockholders and may present additional challenges.

We may also elect to pursue a dissolution and liquidation of the Company instead of a strategic transaction, which may impact the timing and amount of payments to our stockholders.

• We will require substantial additional capital to finance our operations which may not be available to us on acceptable terms, or at all.

If we fail to obtain necessary financing, we may be unable to complete the development and potential commercialization of our product candidates.

• The price of our common stock does not meet the requirements for continued listing on Nasdaq.

If we fail to regain compliance with the minimum listing requirements, our common stock will be subject to delisting.

Our ability to publicly or privately sell equity securities and the liquidity of our common stock could be adversely affected if our common stock is delisted.

• We have incurred significant losses in every quarter since our inception and anticipate that we will continue to incur significant losses in the future.

• We have a limited operating history, which may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

• We have a limited operating history as a company developing therapies using de novo protein design technology, which may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

• We currently have no source of product revenue and may never become profitable.

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If we are unable to complete development of, or commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed.

• Our business is heavily dependent on the success of our Neoleukin platform and of our most advanced product candidate, NL-201.

Existing and future preclinical studies and clinical trials of our product candidates may not be successful, and if we are unable to commercialize these product candidates or experience significant delays in doing so, our business will be materially harmed.

• Our clinical trials or those of any future collaborators may reveal significant adverse events not seen in our preclinical studies and may result in a safety profile that could inhibit regulatory approval or market acceptance of any of our product candidates.

• Our business is heavily dependent on the success of our Neoleukin design process.

Preclinical studies and clinical trials of our product candidates may not be successful, and if we are unable to commercialize these product candidates or experience significant delays in doing so, our business will be materially harmed.

• Future clinical trials or additional preclinical studies may reveal significant adverse events not seen in our earlier preclinical studies and may result in a safety profile that could inhibit regulatory approval or market acceptance of any of our product candidates.

• If we do not achieve our projected development goals in the timeframes we announce and expect, the commercialization of our products may be delayed and, as a result, our stock price may decline.

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The loss of our third-party manufacturers or suppliers, or our or their failure to comply with applicable regulatory requirements or to supply sufficient quantities at acceptable quality levels or prices, or at all, would materially and adversely affect our business.

• The continued impact of the novel strain of coronavirus, SARS-CoV-2, which causes COVID-19 disease, could adversely impact our business, including our preclinical development activities and clinical trial activities.

• If we are not able to obtain, maintain, and enforce patent protection and other intellectual property rights for our product candidates, our Neoleukin platform technology, or other proprietary technologies we may develop, development and commercialization of our product candidates may be adversely affected.

• Unfavorable global economic conditions or other geopolitical developments could adversely affect our business, financial condition, stock price, and results of operations.

• If we are not able to obtain, maintain, and enforce patent protection and other intellectual property rights for our product candidates, our Neoleukin design process technology, or other proprietary technologies we may develop, the development and commercialization of our product candidates may be adversely affected.

You should carefully consider the following risk factors, in addition to the other information contained in this Annual Report on Form 10-K and the information incorporated by reference herein.

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Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in this Annual Report on Form 10-K.

Risks Related to Strategic Process and Potential Strategic Transaction

We may not be successful in identifying and implementing any strategic transaction and any strategic transactions that we may consummate in the future may not be successful.

In November 2022, we made the strategic decision to wind down our clinical trial of NL-201, a de novo protein designed to mimic the therapeutic activity of the cytokines interleukin-2, or IL-2, and interleukin-15, or IL-15, for the potential treatment of various types of cancer.

In connection with that decision, our Board of Directors, or Board, approved a reduction in our workforce designed to reduce our operating expenses to increase our cash runway.

In March 2023, based on the challenging capital markets and resources required to bring our earlier stage programs forward to a point of potential viability, the Board approved a plan to significantly reduce the remainder of our workforce while we undertake a comprehensive assessment of strategic options to maximize stockholder value.

These strategic options may include a merger, reverse merger, sale, wind-down, liquidation and dissolution or other strategic transaction.

However, there can be no assurance that we will be able to successfully consummate any particular strategic transaction.

The process of continuing to evaluate these strategic options may be very costly, time-consuming and complex and we may incur significant costs related to this continued evaluation.

We may also incur additional unanticipated expenses in connection with this process.

A considerable portion of these costs will be incurred regardless of whether any such course of action is implemented or transaction is completed.

Any such expenses will decrease the remaining cash available for use in our business and may diminish or delay any future distributions to our stockholders.

In addition, we may not be able to adequately limit or avoid future liabilities, including future costs relating to the lease on our headquarters, which may impair the value of any potential transaction or present additional challenges to completing a strategic transaction.

There can be no assurances that any particular course of action, business arrangement or transaction, or series of transactions, will be pursued, successfully consummated, lead to increased stockholder value, or achieve the anticipated results.

Any failure of such potential transaction to achieve the anticipated results could significantly impair our ability to enter into any future strategic transactions and may significantly reduce or delay any future distributions to our stockholders.

We may not realize any additional value in a strategic transaction.

The market capitalization of our company is below the value of our current cash, cash equivalents and investments.

Potential counterparties in a strategic transaction involving our company may place minimal or no value on our assets, including NL-201 and our de novo protein design methodology.

Further, the development and any potential commercialization of our product candidates would require substantial additional cash to fund the costs associated with conducting the necessary preclinical and clinical testing and obtaining regulatory approval.

Consequently, any potential counterparty in a strategic transaction involving our company may choose not to spend the additional resources necessary to continue developing our product candidates and may attribute little or no value, in such a transaction, to those product candidates.

If we are successful in completing a strategic transaction, we may be exposed to other operational and financial risks.

Although there can be no assurance that a strategic transaction will result from the process we have undertaken to assess strategic options, the negotiation and consummation of any such transaction will require significant time on the part of our management, and the diversion of management’s attention may disrupt our the orderly operation of our company.

The negotiation and consummation of any such transaction may also require more time or greater cash resources than we anticipate and expose us to other operational and financial risks, including:

• increased near-term and long-term expenditures;

• exposure to unknown liabilities

• higher than expected acquisition, disposition or integration costs;

• incurrence of substantial debt or dilutive issuances of equity securities to fund future operations

• write-downs of assets or incurrence of non-recurring, impairment or other charges;

• difficulty and cost in combining the operations and personnel of any acquired business with our operations and personnel

• impairment of relationships with key suppliers or customers of any acquired business due to changes in management and ownership

• inability to retain key employees of our company or any acquired business;

• possibility of future litigation

Any of the foregoing risks could have a material adverse effect on our business, financial condition and prospects

Our decision to wind down our clinical trial of NL-201, suspend our early stage research and development work and significantly reduce our workforce may not result in the anticipated savings and could disrupt our business.

In November 2022, we made the decision to wind down our clinical trial of NL-201 and restructure our research team to focus early stage, next generation de novo protein design for immunotherapies.

In March 2023, we decided to further restructure the Company by suspending our early stage research and development and further reducing our workforce with the goal of substantially reducing our operating expenses while we undertake a comprehensive assessment of strategic options to maximize stockholder value .

We may not realize, in full or in part, the anticipated benefits and savings in operating expenses from these decisions due to unforeseen difficulties, delays or unexpected costs.

If we are unable to realize the expected cost savings, our financial condition would be adversely affected and it may be more difficult to complete a potential strategic transaction.

Furthermore, the reduction in our workforce may result in weaknesses in our infrastructure and operations and may increase the risk that we become unable to comply with legal and regulatory requirements .

Our Board may decide to pursue a dissolution and liquidation.

In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities.

There can be no assurance that a strategic transaction will be completed and, whether or not such strategic transaction is completed, our Board may decide to pursue a dissolution and liquidation.

In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such decision and, as with the passage of time the amount of cash available for distribution will be reduced as we continue to fund our operations.

In addition, if our Board were to approve and recommend, and our stockholders were to approve, a dissolution and liquidation, we would be required under Delaware corporate law to pay our outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to our stockholders.

As a result of this requirement, a portion of our assets may need to be reserved pending the resolution of such obligations and the timing of any such resolution is uncertain.

In addition, we may be subject to litigation or other claims related to a dissolution and liquidation.

If a dissolution and liquidation were pursued, our Board, in consultation with our advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve.

Accordingly, holders of our common stock could lose all or a significant portion of their investment in the event of a liquidation, dissolution or winding up.

Our ability to consummate a strategic transaction depends on our ability to retain our employees required to consummate such transaction.

Our ability to consummate a strategic transaction depends upon our ability to retain our employees required to consummate such a transaction, and the loss of such employees’ services may adversely impact the ability to consummate such transaction.

In March 2023, we implemented a further reduction in our workforce designed to substantially reduce our operating expenses while we undertake a comprehensive assessment of strategic options to maximize stockholder value .

Our cash conservation activities may yield unintended consequences, such as attrition beyond our planned reduction in workforce and reduced employee morale, which may cause remaining employees to seek alternative employment.

Our ability to successfully complete a strategic transaction depends in large part on our ability to retain our remaining personnel.

If we are unable to successfully retain our remaining personnel, we are at risk of a disruption to our exploration and consummation of strategic options as well as business operations.

We may become involved in securities class action litigation that could divert management’s attention and harm the company’s business, and insurance coverage may not be sufficient to cover all costs and damages.

In the past, securities class action litigation has often followed certain significant business transactions, such as the sale of a company or announcement of any other strategic transaction, or the announcement of negative events, such as negative results from clinical trials.

These events may also result in or be concurrent with investigations by the SEC.

We may be exposed to such litigation or investigation even if no wrongdoing occurred.

Litigation and investigations are usually expensive and divert management’s attention and resources, which could adversely affect our business and cash resources and our ability to consummate a potential strategic transaction or the ultimate value our stockholders receive in any such transaction.

Risks Related to Our Financial Position and Capital Needs

We will require substantial additional capital to finance our operations which may not be available to us on acceptable terms, or at all.

If we fail to obtain necessary financing, we may be unable to complete the development and potential commercialization of our product candidates.

We will require substantial additional capital to complete a strategic transaction and finance future operations, which may not be available to us on acceptable terms, or at all.

If we fail to obtain necessary financing, we may be unable to complete the development and potential commercialization of any future product candidates.

The development of biopharmaceutical product candidates is capital-intensive.

If our product candidates enter and advance through preclinical studies and clinical trials, we will need substantial additional funds to expand or create our development, regulatory, manufacturing, marketing, and sales capabilities.

We have used substantial funds to develop our technology and product candidates and will require significant funds to conduct further research and development and preclinical testing and clinical trials of our product candidates, to seek regulatory approvals for our product candidates and to manufacture and market products, if any, which are approved for commercial sale.

In addition, we expect to continue incurring costs associated with operating as a public company.

Preclinical studies and clinical trials for our product candidates will require substantial funds to complete.

As of December 31, 2021, we had approximately $142.5 million in cash and cash equivalents.

We expect to incur substantial expenditures in the foreseeable future as we seek to advance NL-201 and any future product candidates through preclinical and clinical development, the regulatory approval process and, if approved, commercial launch activities.

Based on our current operating plan, we believe that our available cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements into the second half of 2023.

However, our future capital requirements and the period for which we expect our existing resources to support our operations, fund expansion, develop new or enhanced products, or otherwise respond to competitive pressures, may vary significantly from what we expect, and we may need to seek additional funds sooner than planned.

Our monthly spending levels vary based on new and ongoing research and development and other corporate activities.

Because the length of time and activities associated with successful research and development of our product candidates is highly uncertain, we are unable to estimate the actual funds we will require for development and any marketing and commercialization activities for approved products.

As of December 31, 2022, we had approximately $96.4 million in cash, cash equivalents, and short-term investments.

We have spent a significant amount of money on our operations to date, including research and development, preclinical and clinical studies.

We will continue to incur costs related to the discontinued development of NL-201 and suspension of our research and development activities.

Based on our current operating plan, we believe that our available cash, cash equivalents, and short-term investments will be sufficient to fund our operating expenses and capital expenditure requirements through at least 12 months following the filing date of this Form 10-K.

However, our current operating plan does not contemplate the resumption of research and development activities or the commencement of any clinical trials, and we do not expect to be able to fully support our operations based on the assumptions of that operating plan.

We announced in March 2023 that we have suspended our research and development operations so that we can focus on reviewing strategic alternatives, which may include a sale, merger, divestiture of assets, licensing or other strategic alternative, with the intention of improving shareholder value, While we expect to have adequate capital to fund our operations through this process, our future capital requirements and the period during which we expect to complete this strategic process may vary significantly from what we expect, and we may have to seek an alternate resolution to the process.

In addition, even if we are successful in completing a strategic transaction, we may still need to raise additional funds for any research and development or clinical programs we may pursue in the future.

Our monthly spending levels may vary, and may also be impacted by inflationary pressures in the current economic environment.

Because the length of time and activities associated with successful research and development of our product candidates is highly uncertain, and because we have suspended our research and development activities while we pursue strategic alternatives, we are unable to estimate the actual funds we will require for development and any marketing and commercialization activities for any product candidates that ultimately may be approved for sale.

Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:

• the timing, cost and progress of preclinical and clinical development activities;

• the number and scope of preclinical and clinical programs we decide to pursue;

• the progress of the development efforts of parties with whom we have entered or may in the future enter into collaborations and/or research and development agreements;

• the timing and amount of milestone and other payments we may receive or make under our collaboration agreements;

• our ability to complete a strategic transaction in a timely manner and on acceptable terms;

• the timing, cost and progress of research, preclinical, and clinical development activities;

• the number and scope of development, preclinical and clinical programs we decide to pursue;

• the terms of any collaborations and/or research and development agreements we may enter into, which may impact the cost, timing and development plans of one or more of our product candidate programs;

• our ability to maintain our current licenses and to establish new collaboration arrangements;

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• the costs of manufacturing our product candidates by third parties;

• the cost of regulatory submissions and timing of regulatory approvals;

• the potential delays in our preclinical studies, our development programs and our ongoing and planned clinical trial activities due to the effects of the COVID-19 pandemic;

• the cost of commercialization activities if our product candidates or any future product candidates are approved for sale, including marketing, sales and distribution costs;

• our efforts to enhance operational systems and hire additional personnel, including personnel to support development of our product candidates.

If we are unable to obtain funding on a timely basis or on acceptable terms, we may have to delay, reduce or terminate our research and development programs and preclinical studies or clinical trials, limit strategic opportunities or undergo reductions in our workforce or other corporate restructuring activities.

We do not expect to realize revenue from sales of commercial products or royalties from licensed products in the foreseeable future, if at all, and, in no event, before our product candidates are clinically tested, approved for commercialization and successfully marketed.

We will be required to seek additional funding in the future and currently intend to do so through additional collaborations and/or licensing agreements, public or private equity offerings or debt financings, credit or loan facilities, or a combination of one or more of these funding sources.

• the cost of regulatory requirements, regulatory submissions and timing of regulatory approvals;

• the potential delays in our preclinical studies, our development programs and our ongoing and planned clinical trial activities due to the effects of global events, including macroeconomic conditions and continued supply chain disruptions;

• the impact of inflationary pressures on salaries and wages, and costs of goods and transportation expenses, among other things;

• the cost of commercialization activities if any future product candidates are approved for sale, including marketing, sales and distribution costs;

• our efforts to enhance operational systems and hire personnel to support development of any future product candidates.

If we are unable to obtain funding on a timely basis or on acceptable terms, we may have to pursue less advantageous strategic opportunities, limit future research and development, or dissolve the Company and liquidate our assets.

We do not expect to realize revenue from sales of commercial products or royalties from licensed products in the foreseeable future, if at all, and, in no event would we recognize such revenues before any future product candidates are clinically tested, approved for commercialization, and successfully marketed.

We may seek the additional funding we will need to continue operating in the future through collaborations and/or licensing agreements, public or private equity offerings or debt financings, credit or loan facilities, or a combination of one or more of these funding sources.

If we raise additional funds by issuing equity securities, our stockholders will suffer dilution and the terms of any financing may adversely affect the rights of our stockholders.

In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders.

Our future debt financings, if available, are likely to involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of our equity securities received any distribution of our corporate assets.

If we are able to raise additional funds through future debt financings, the terms of such financings are likely to involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of our equity securities received any distribution of our corporate assets.

If we raise additional funds through licensing or collaboration arrangements with third parties, we may have to relinquish valuable rights to our product candidates or grant licenses on terms that are not favorable to us.

We also could be required to seek collaborators for product candidates at an earlier stage than otherwise would be desirable or relinquish our rights to product candidates or technologies that we otherwise would seek to develop or commercialize ourselves.

We also could be required to seek collaborators for product candidates at an earlier stage than otherwise would be desirable or relinquish some or all of our rights to certain product candidates or technologies that we otherwise would seek to develop or commercialize ourselves.

Failure to obtain capital when needed on acceptable terms may force us to delay, limit or terminate our product development and commercialization of our current or future product candidates, which could have a material and adverse effect on our business, financial condition, results of operations, and prospects.

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Investment in biotechnology is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate effect or an acceptable safety profile, gain regulatory approval, or become commercially viable.

We do not have any products approved by regulatory authorities for marketing or commercial sale, we have not generated any revenue from product sales to date, and all of our product candidates are in early clinical or preclinical development.

We continue to incur significant expenses related to our ongoing operations.

As a result, we are not profitable and have incurred losses in every reporting period since our inception in 2003.

We do not have any products approved by regulatory authorities for marketing or commercial sale, we have not generated any revenue from product sales to date, all of our product candidates are in early stages of research and development and we have suspended our research and development activities for the near term while we focus on evaluating strategic alternatives for the Company.

As a result, we are not profitable and have incurred losses in every reporting period since our inception as Aquinox in 2003.

For the years ended December 31, 2022 and 2021, we reported a net loss of $57.6 million and $60.7 million, respectively.

As of December 31, 2021, we had an accumulated deficit since inception of $393.5 million.

We expect to continue to incur significant expenses and operating losses for the foreseeable future as we seek to identify, acquire and conduct research and development of future product candidates, and potentially begin to commercialize any future products that may achieve regulatory approval.

As of December 31, 2022,we had an accumulated deficit since our inception as Aquinox of $451.1 million.

While we have taken measures to reduce our expenses in the near term, we continue to incur significant expenses related to our ongoing operations, including expenses relating to the wind down of our clinical program for NL-201 and expenses related to our ongoing corporate restructuring, and are not currently moving any of our existing product candidates toward commercialization.

We therefore expect to continue to have operating losses for the foreseeable future.

If we are able to complete a strategic transaction that will allow us to resume research and development activities, we may resume our work to identify, acquire, and conduct research and development of future product candidates, and potentially begin to commercialize any future products that may achieve regulatory approval.

We may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our financial condition.

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Our prior losses and expected future losses have had, and will continue to have, an adverse effect on our financial condition.

If any of our future product candidates fail in clinical trials or do not gain regulatory approval, or if approved, fails to achieve market acceptance, we may never become profitable.

If we are unable to bring any of our product candidates or future product candidates through full clinical trials for any reason, or if such product candidates or future product candidates do not gain regulatory approval, or if approved, fail to achieve market acceptance, we may never become profitable.

Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.

The price of our common stock does not meet the requirements for continued listing on Nasdaq.

If we fail to regain compliance with the minimum listing requirements, our common stock will be subject to delisting.

Our ability to publicly or privately sell equity securities and the liquidity of our common stock could be adversely affected if our common stock is delisted.

The continued listing standards of the Nasdaq Stock Market, or Nasdaq, require, among other things, that the minimum bid price of a listed company’s stock be at or above $1.00.

If the closing minimum bid price is below $1.00 for a period of more than 30 consecutive trading days, the listed company will fail to be in compliance with Nasdaq’s listing rules and, if it does not regain compliance within the grace period, will be subject to delisting.

On October 26, 2022, we received a notice from the Nasdaq Listing Qualifications Department notifying us that for 30 consecutive trading days, the bid price of our common stock had closed below the minimum $1.00 per share requirement.

In accordance with Nasdaq’s listing rules, we were afforded a grace period of 180 calendar days, or until April 24, 2023, to regain compliance with the bid price requirement.

In order to regain compliance, the bid price of our common stock must close at a price of at least $1.00 per share for a minimum of 10 consecutive trading days.

If we fail to regain compliance by April 24, 2023, we may be eligible for a second 180 day compliance period, provided that, on such date, we meet the continued listing requirement for market value of publicly held shares and all other applicable Nasdaq listing requirements (other than the minimum closing bid price requirement) and we provide written notice to Nasdaq of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary.

Such extension of the grace period would be subject to Nasdaq’s discretion, and there can be no guarantee that we would be granted an extension.

We cannot provide any guarantee that we will regain compliance during the grace period or be able to maintain compliance with Nasdaq’s listing requirements in the future.

If we are not able to regain compliance during the grace period, or any extension of the grace period for which we may be eligible, our common stock will be subject to delisting.

Delisting from Nasdaq could adversely affect our ability to raise additional financing through the public or private sale of equity securities, would significantly affect the ability of investors to trade our securities and would negatively affect the value and liquidity of our common stock.

Delisting could also have other negative results, including the potential loss of confidence by employees, the loss of institutional investor interest and fewer business development opportunities.

We have a limited operating history as a company developing therapies using de novo protein design technology, which may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

Since our acquisition of the former Neoleukin Therapeutics, Inc., our operations to date have been primarily limited to organizing and staffing our company, acquiring product and technology rights, discovering and developing novel de novo proteins, undertaking preclinical studies and early clinical development activities, and, prior to the merger, developing small molecule drug candidates and conducting clinical trials of rosiptor.

Since we became Neoleukin Therapeutics, Inc., our operations have been primarily limited to organizing and staffing our company, acquiring product and technology rights, discovering and developing novel de novo proteins, and undertaking preclinical studies and early clinical development activities.

We have not yet obtained regulatory approval for any product candidate.

In addition, in November 2022 and March 2023, we announced corporate restructurings which will result in a wind-down of the clinical trial for our first product candidate, NL-201, the suspension of our research and development activities, and a significant reduction in our workforce with the intention of focusing on evaluation of a potential strategic alternatives, which may include a sale, merger, divestiture of assets, licensing or other strategic transaction.

Consequently, evaluating our performance, viability or possibility of future success will be more difficult than if we had a longer operating history or approved products on the market.

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Our ability to generate revenue from product sales and achieve profitability will depend upon our ability, alone or with any future collaborators, to successfully commercialize any products that we may develop, in-license, or acquire in the future.

Even if we can successfully achieve regulatory approval for any future product candidates, we do not know when any of these products will generate revenue from product sales for us, if at all.

Our ability to generate revenue from any of our future product candidates also depends on several additional factors, including our or any future collaborators’ ability to:

Even if we can successfully achieve regulatory approval for any product candidates or future product candidates, we do not know when any of these products will generate revenue from product sales for us, if at all.

Our ability to generate revenue from any of our product candidates or future product candidates also depends on several additional factors, including our or any future collaborators’ ability to:

• complete development activities, including the necessary clinical trials;

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Therefore, we are unable to predict the timing or amount of increased expenses, or when or if we will be able to achieve or maintain profitability.

In addition, our expenses could increase beyond expectations if we decide, or are required by the FDA or foreign regulatory authorities, to perform studies or trials in addition to those that we currently anticipate.

Even if we can complete the development and regulatory process for any future product candidates, we anticipate incurring significant costs associated with commercializing these products.

Even if we can generate revenues from the sale of any future product candidates that may be approved, we may not become profitable and may need to obtain additional funding to continue operations.

If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations.

Even if we can complete the development and regulatory process for any product candidates or future product candidates, we anticipate incurring significant costs associated with commercializing these products.

Even if we can generate revenues from the sale of any product candidates or future product candidates that may be approved, we may not become profitable and may need to obtain additional funding to continue operations.

If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and may be forced to reduce our operations.

We will require additional capital to finance our operations which may not be available to us on acceptable terms, or at all.

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If we identify and advance any current or future product candidates into clinical trials and launch and commercialize any product candidates for which we receive regulatory approval, we expect research and clinical development expenses, and our selling, general and administrative expenses to increase substantially.

In connection with our ongoing activities, we believe that our existing cash and cash equivalents will be sufficient to fund our operating requirements for at least the next 12 months.

In connection with our current strategic initiatives, we believe that our existing cash, cash equivalents, and short-term investments will be sufficient to fund our operating requirements through at least 12 months following the filing date of this Form 10-K.

However, circumstances may cause us to consume capital more rapidly than we anticipate.

We will likely require additional capital for the further development and potential commercialization of future product candidates and may also need to raise additional funds sooner to pursue a more accelerated development of future product candidates.

If we need to secure additional financing, fundraising efforts may divert our management from our day-to-day activities, which may adversely affect our ability to develop and commercialize future product candidates.

If we are successful in completing a strategic transaction and able to resume our research and development activities, we will require additional capital for the further development and potential commercialization of future product candidates and may also need to raise additional funds to pursue a more accelerated development of future product candidates.

If we seek to secure additional financing, fundraising efforts may divert our management from our day-to-day activities, which may adversely affect our ability to develop and commercialize future product candidates.

In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all.

If we do not raise additional capital when required or on acceptable terms, we may need to:

• significantly delay, scale back or discontinue clinical trials related to the development or commercialization of any of our current or future product candidates or cease operations altogether;

• seek strategic alliances for research and development programs at an earlier stage than we would otherwise desire or on terms less favorable than might otherwise be available;

• relinquish, or license on unfavorable terms, our rights to any future product candidates that we otherwise would seek to develop or commercialize ourselves;

If we need to conduct additional fundraising activities and we do not raise additional capital in sufficient amounts or on terms acceptable to us, we may be prevented from pursuing development and commercialization efforts, which will have a material adverse effect on our business, operating results and prospects.

• significantly delay, scale back, or discontinue the development or commercialization of any of our future product candidates or cease operations altogether.

If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may be prevented from pursuing development and commercialization efforts, which will have a material adverse effect on our business, operating results, and prospects.

Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this “Risk Factors” section.

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Our future funding requirements, both near and long-term, will depend on many factors, including, but not limited to:

• our ability to identify additional product candidates for development;

• if we in-license or acquire product candidates from third parties, the cost of in-licensing or acquisition;

• our ability to identify or acquire additional product candidates for development;

• the initiation, progress, timing, costs, and results of clinical trials for any future product candidates;

• the clinical development plans we establish for NL-201 and any future product candidates;

• the estimated costs for discontinuing the development of NL-201;

• the clinical development plans we establish for any future product candidates;

• if we in-license or acquire product candidates from third parties, the cost of in-licensing or acquisition;

• the achievement of milestones and our obligation to make milestone payments under our present or any future in-licensing agreements;

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• the cost to establish, maintain, expand, and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with licensing, preparing, filing, prosecuting, defending, and enforcing any patent claims and maintaining and enforcing other intellectual property rights;

• the effects of the COVID-19 pandemic on our business and financial results;

• the effects of global macroeconomic trends, including supply chain disruptions, inflationary pressures, unemployment rates and impacts of a potential market recession, on our business and financial results;

• the effect of competing technological and market developments;

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Risks Related to Discovery, Development, and Commercialization

Our product candidates are in early stages of development and may fail in development or suffer delays that materially and adversely affect their commercial viability.

Product candidates in early stages of development may fail in development or suffer delays that materially and adversely affect their commercial viability.

If we are unable to complete development of, or commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed.

We are in the early stages of our development efforts.

We have no products on the market and all of our product candidates, including NL-201, are still in early clinical, preclinical or drug discovery stages, and we may not ever obtain regulatory approval for any of our product candidates.

We have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals, including approval by the FDA.

Before obtaining regulatory approval for the commercial distribution of our product candidates, we or an existing or future collaborator must conduct extensive preclinical tests and clinical trials to demonstrate the safety and efficacy in humans of our product candidates.

Additionally, we have a portfolio of targets and programs that are in earlier stages of discovery and preclinical development and may never advance to clinical-stage development.

If we do not receive regulatory approvals for clinical testing and commercialization of our product candidates, we may not be able to continue our operations.

We may not have the financial resources to continue development of, or to enter into collaborations for, a product candidate if we experience any issues that delay clinical trials or delay and/or prevent regulatory approval of, or our ability to commercialize, product candidates, including:

• preclinical study results may show the product candidate to be less effective than desired or to have harmful or problematic side effects, which could cause us to delay or even abandon clinical testing;

• negative or inconclusive results from our clinical trials or the clinical trials of others for product candidates similar to ours, leading to a decision or requirement to conduct additional preclinical testing or clinical trials or abandon a program;

Any product candidates that we have are in the early stages of development efforts.

We have no products on the market, we have elected to discontinue development of NL-201, we have suspended development of all of our remaining product candidates, which are still in drug discovery stages, and we may not ever obtain regulatory approval for any of our product candidates.

We have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals, including approval by the FDA, and have significantly reduced our clinical trial team in connection with the discontinuation of development of NL-201.

Before obtaining regulatory approval for the commercial distribution of any future product candidates, we must conduct extensive preclinical tests and clinical trials to demonstrate the safety and efficacy in humans of our product candidates.

Moreover, our development portfolio consists of targets and programs that are in earlier stages of discovery and preclinical development and may never advance to clinical-stage development, and in March 2023 we suspended deveopment of all of our current product candidates to focus on evaluation of strategic alternatives for the Company while reducing operating costs in the near te.

If we are able to resume development, or if we are able to acquire or in-license additional product candidates, but we do not receive regulatory approvals for clinical testing and commercialization of such product candidates, we may not be able to continue our operations.

We may not have the financial resources to continue development of, or to enter into collaborations for, a product candidate if we experience any issues that cause or require us to delay or abandon preclinical or clinical trials or delay and/or prevent regulatory approval of or our ability to commercialize product candidates, including:

• preclinical study results showing the product candidate to be less effective than desired or to have harmful or problematic side effects;

• negative or inconclusive results from our clinical trials or the clinical trials of others for product candidates similar to ours;

• product-related side effects experienced by patients in our clinical trials or by individuals using drugs or therapeutic biologics similar to our product candidates;

• our third-party manufacturers’ inability to successfully manufacture our products or to meet regulatory specifications;

• a failure to demonstrate that the dose for the product candidate has been optimized;

• the inability of third-party manufacturers to successfully manufacture our products or to meet regulatory specifications;

• inability of any third-party contract manufacturer to scale up manufacturing of our product candidates and those of our collaborators to supply the needs of clinical trials or commercial sales;

• delays in submitting INDs or comparable foreign applications, or delays or failures in obtaining the necessary approvals from regulators to commence a clinical trial, or a suspension or termination of a clinical trial once commenced;

• conditions imposed by the FDA, the European Medicines Agency, or EMA, or other applicable regulatory authorities regarding the scope or design of our clinical trials;

• delays in enrolling patients in our clinical trials;

• high drop-out rates of our clinical trial patients;

• inadequate supply or quality of product candidate components or materials or other supplies necessary for the conduct of our clinical trials;

• conditions imposed by the FDA, the European Medicines Agency, or EMA, or other applicable regulatory authorities regarding the scope or design of our future clinical trials;

• delays in enrolling patients in clinical trials for future product candidates;

• high drop-out rates of patients in our future clinical trial patients;

• inadequate supply or quality of product candidate components or materials or other supplies necessary for the conduct of our future clinical trials;

• inability to obtain alternative sources of supply for which we have a single source for product candidate components or materials;

• greater than anticipated costs of our clinical trials;

• supply chain disruptions that may impact our ability to obtain materials for research and development, preclinical or future clinical testing or significantly increase our costs;

• greater than anticipated costs of development, including preclinical studies and clinical trials;

• manufacturing costs, formulation issues, pricing or reimbursement issues or other factors that no longer make a product candidate economically feasible;

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• varying interpretations of our data by the FDA, EMA, or other applicable regulatory authorities.

We or our future partners’ inability to complete development of, or commercialize our product candidates, or significant delays in doing so due to one or more of these factors, could have a material and adverse effect on our business, financial condition, results of operations, and prospects.

Our inability to complete development of, or commercialize our product candidates, or significant delays in doing so due to one or more of these factors, could have a material and adverse effect on our business, financial condition, results of operations, and prospects.

Further, cancer therapies are sometimes characterized as first-line, second-line, or third-line, and the FDA often approves new therapies initially only for advanced cancers, i.e.

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Second- and third-line therapies are administered to patients when prior therapy is not effective.

Our current phase 1 clinical trial for NL-201 is in patients who have received one or more prior treatments, and we expect that to be the case for future clinical trials of NL-201.

Subsequently, for those of our products that prove to be sufficiently beneficial, if any, we would expect to seek approval in earlier lines of therapy.

We expect that our product candidates will initially be targeted to second- or third-line patients, and that if those product candidates prove to be sufficiently beneficial in those initial trials, we would expect to seek subsequent approval in earlier lines of therapy.

Any product candidates we develop, even if approved, may not be successfully approved for earlier lines of therapy, and, prior to any such approvals, we will likely have to conduct additional clinical trials, which are often very lengthy, expensive, and have a significant risk of failure.

Our business is heavily dependent on the success of our Neoleukin platform and of our most advanced product candidate, NL-201.

Our business is heavily dependent on the success of our Neoleukin design process.

Our business is heavily dependent on our ability to obtain regulatory approval of, and then successfully launch and commercialize, our product candidates.

We have invested a significant portion of our efforts and financial resources in the development of our proprietary system of advanced computational algorithms and methods for the design of functional de novo proteins, which we refer to as our Neoleukin platform, with an initial focus on key cytokine mimetics, which we refer to as Neoleukin de novo cytokine mimetics.

Our lead product candidate, NL-201, is a Neoleukin de novo protein derived from our Neoleukin platform.

However, NL-201 and our other product candidates are still in early stages of development.

Our ability to generate commercial product revenues, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of our lead product candidates.

Our product candidates may not be successful in clinical trials or receive regulatory approval.

Even if they are successful in clinical trials, regulatory authorities may not complete their review in a timely manner, or additional delays may result if an FDA Advisory Committee or other regulatory authority recommends non-approval or restrictions on approval.

We have invested a significant portion of our efforts and financial resources in the development of advanced computational algorithms and other methods, including machine learning for the design of functional de novo proteins with an initial focus on key cytokine mimetics, which we refer to as Neoleukin de novo cytokine mimetics.

In the fourth quarter of 2022, based on a review of the preliminary data, the expected benefit to risk ratio for patients, and recent developments in the field of IL-2 therapeutics, we made a strategic decision to discontinue development for our lead product candidate, NL-201, and undertake a corporate restructuring to focus investment on the next generation of de novo protein design.

As a result, all product candidates we have pursued in recent months are in early stages of development.

In March 2023, our Board of Directors approved a further restructuring of the Company which resulted in the near term suspension of all research and development activities to focus on a review of strategic alternatives.

If we are able to bring any of our product candidates to clinical trial, they may not be successful in those trials or, even if they are, they may not receive regulatory approval in a timely manner, or at all.

Regulatory agencies, such as an FDA Advisory Committee or similar authority, may recommend non-approval or place restrictions on approval, which may also increase costs and delay commercialization.

In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory authority policy during the period of product development, clinical trials, and the review process.

For example, the Oncology Center of Excellence within the FDA has recently advanced Project Optimus, which is an initiative to reform the dose optimization and dose selection paradigm in oncology drug development to emphasize selection of an optimal dose, which maximizes not only the efficacy of a drug but the safety and tolerability as well.

This may require sponsors to spend additional time and resources to further explore a product candidate’s dose-response relationship to facilitate optimum dose selection.

Other recent Oncology Center of Excellence initiatives include Project FrontRunner, a framework for identifying candidate drugs for initial clinical development in the earlier lines of therapies rather than only after exhausting available treatment options.

We are considering these policy changes as they relate to our programs.

Regulatory authorities may approve a product candidate for targets, disease indications, or patient populations that are not as broad as we intended or desired, approve more limited indications than requested, or require distribution restrictions or strong safety language, such as contraindications or boxed warnings.

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If the markets for patient subsets that we are targeting are not as significant as we estimate, we may not generate significant revenues from sales of such products, if approved.

We plan to seek regulatory approval to commercialize our product candidates both in the United States and in selected foreign countries.

We expect to seek regulatory approval to commercialize any future product candidates we may bring forward for clinical development both in the United States and in selected foreign countries.

In order to market and sell our product candidates in the European Union and many other jurisdictions, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements.

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We may be required to expend significant resources to obtain regulatory approval, which may not be on a timely basis or successful at all, and to comply with ongoing regulations in these jurisdictions.

The success of our Neoleukin platform, NL-201, and our other product candidates will depend on many factors, including the following:

The success of our Neoleukin design process and our future product candidates will depend on many factors, including the following:

• successful completion of necessary preclinical studies to enable the initiation of clinical trials;

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If we do not achieve any one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize our product candidates, which would materially harm our business.

Our current or future clinical trials or those of any future collaborators may reveal significant adverse events not seen in our preclinical studies and may result in a safety profile that could inhibit regulatory approval or market acceptance of any of our product candidates.

If significant adverse events or other side effects are observed in any of our clinical trials, we may have difficulty recruiting patients to our clinical trials, patients may drop out of our trials, we may be required to pause, delay, or abandon the trials or our development efforts of one or more product candidates altogether, we may be required to have more restrictive labeling, or we may experience the delay or denial of regulatory approval by the FDA, EMA or other applicable regulatory authorities.

We, the FDA, EMA or other applicable regulatory authorities, or IRB, may suspend clinical trials of a product candidate at any time for various reasons, including a belief that subjects or patients in such trials are being exposed to unacceptable health risks or adverse side effects.

Future clinical trials or additional preclinical studies may reveal significant adverse events not seen in our earlier preclinical studies and may result in a safety profile that could inhibit regulatory approval or market acceptance of any of our product candidates.

If significant adverse events or other side effects are observed in any of our future clinical trials, we may have difficulty recruiting patients to our clinical trials, patients may drop out of our trials, we may be required to revise, pause, delay, or abandon the trials or our development efforts of one or more product candidates altogether, we may be required to have more restrictive labeling, or we may experience the delay or denial of regulatory approval by applicable regulatory authorities.

We, applicable regulatory authorities, or IRBs, may suspend clinical trials of a product candidate at any time for various reasons, including a belief that subjects or patients in such trials are being exposed to unacceptable health risks or adverse side effects.

Some potential therapeutics developed in the biotechnology industry that initially showed therapeutic promise in early-stage trials have later been found to cause side effects that prevented their further development.

Even if the side effects do not preclude the product candidate from obtaining or maintaining marketing approval, undesirable side effects may inhibit market acceptance of the approved product due to its tolerability versus other therapies.

NL-201 was designed to mimic the therapeutic activity of the cytokine interleukin-2, or IL-2, and interleukin-15, or IL-15, while limiting the toxicity cause by the preferential binding of native IL-2 and native IL-15 to cells that co-express the alpha subunit known as CD25.

However, it is possible NL-201 will demonstrate significant adverse events similar to, or in addition to, those associated with IL-2 and IL-15, such as vascular leak syndrome, hypotension, impaired kidney and liver function, and mental status changes.

Therapies involving cytokines have been known to cause side effects such as neurotoxicity and cytokine release syndrome.

Further, de novo proteins are a new class of therapeutics that have not been previously tested in humans.

De novo proteins can be substantially different from all known proteins and as a result, it is unknown to what extent, if any, these de novo proteins will produce immunologic reactions in patients.

Therapies involving cytokines have been known to cause side effects such as neurotoxicity and cytokine release syndrome, and there is no guarantee that these side effects can be avoided through de novo protein design.

Further, de novo proteins are a new class of therapeutics that have not been tested in humans prior to our initial Phase 1 clinical trial of NL-201.

De novo proteins can be substantially different from all known proteins and as a result it is unknown to what extent, if any, de novo proteins may produce immunologic reactions in patients.

Immunologic reactions could substantially limit the effectiveness of the treatment, the duration of treatment, or represent safety risks.

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If we do not meet these milestones as publicly announced, or at all, the commercialization of our products may be delayed or never achieved and, as a result, our stock price may decline.

Our approach to the discovery and development of our therapeutic treatments is based on novel de novo protein design technology that are unproven and may not result in marketable products.

The success of our business depends primarily upon our ability to discover, develop, and commercialize a pipeline of product candidates using our Neoleukin platform.

Unlike traditional protein-based therapeutics that modify native proteins, our Neoleukin platform designs new proteins from the ground up.

Our platform uses advanced computational algorithms and methods to design functional de novo proteins that are hyper-stable, modifiable, and are designed to optimize desired intermolecular interactions and eliminate undesirable interactions.

While we believe this approach will enable us to develop product candidates that may offer unique therapeutic benefits, the scientific basis of our efforts to develop product candidates using our Neoleukin platform is ongoing and may not result in viable product candidates.

While we have had favorable preclinical study results related to NL-201, we are still in the early stages of product development of NL-201.

Our approach may be unsuccessful in moving NL-201 through clinical development, discovering additional product candidates, and NL-201 or any product candidates that we are currently developing may be shown to have harmful side effects or may have other characteristics that may necessitate additional clinical testing or make the product candidates unmarketable or unlikely to receive marketing approval.

If any of these events occur, we may be forced to abandon our development efforts for a program or programs, which would have a material adverse effect on our business and could potentially cause us to cease operations.

To date, NL-201 is our only product candidate currently being tested in a clinical trial, and testing is in the early stages.

We have not tested any of our other product candidates in any clinical trials.

We may ultimately discover that our Neoleukin platform and any product candidates resulting therefrom do not possess certain properties required for therapeutic effectiveness.

Our approach to the discovery and development of our therapeutic treatments is based on de novo protein design technology which is unproven and may not result in marketable products.

The success of our recent development programs depends primarily upon the ability to discover, develop, and commercialize a pipeline of product candidates using our Neoleukin de novo protein design process.

Unlike traditional protein-based therapeutics that modify native proteins, our Neoleukin design process allows us to create new proteins from the ground up.

Our design process uses advanced computational algorithms and methods to design functional de novo proteins that are hyper-stable, modifiable, and are designed to optimize desired intermolecular interactions and eliminate undesirable interactions.

While we believe this approach will enable the development of product candidates that may offer unique therapeutic benefits, the scientific basis of our efforts to develop product candidates using our Neoleukin design process is ongoing and may not result in viable product candidates.

While we had favorable preclinical study results related to NL-201, and monotherapy data that demonstrated engagement of the target receptor, expected pharmacodynamic changes for a potent IL-2/IL-15 agonist, and preliminary data that did not demonstrate significant immunogenicity even after multiple cycles of therapy, and in November 2022 we determined that the resources required to continue clinical development would be better applied to advancing the next generation of de novo immunotherapies.

We may not be successful in moving any of our future product candidates into clinical development, and any product candidates that we are able to bring into clinical trials may subsequently be shown to have harmful side effects or may have other characteristics that may necessitate additional clinical testing or make the product candidates unmarketable or unlikely to receive marketing approval.

If any of these events occur, we may be forced to abandon our development efforts for one or more programs, which would have a material adverse effect on our business and could potentially cause us to cease operations.

Following the completion of the wind-down of our NL-201 clinical trial, we will not have any product candidate currently being tested in a clinical trial, nor do we have near term plans to commence any additional clinical trials.

We have not tested any of our other product candidates in clinical trials.

We may ultimately discover that our Neoleukin design process and any product candidates resulting therefrom do not possess certain properties required for therapeutic effectiveness.

Our product candidates may also be unable to remain stable in the human body for the period of time required for the drug to reach the target tissue, or they may trigger immune responses that inhibit the activity of the product candidate or that cause adverse side effects in humans.

We may spend substantial funds attempting to mitigate these properties and may never succeed in doing so.

In addition, product candidates based on our Neoleukin platform may demonstrate different chemical and pharmacological properties in patients than they do in laboratory studies.

Our Neoleukin platform and any product candidates resulting therefrom may not demonstrate the same chemical and pharmacological properties in humans and may interact with human biological systems in unforeseen, ineffective, or harmful ways.

In addition, product candidates based on our Neoleukin design process may demonstrate different chemical and pharmacological properties in patients than they do in laboratory studies.

Our Neoleukin design process and any product candidates resulting therefrom may not demonstrate the same chemical and pharmacological properties in humans and may interact with human biological systems in unforeseen, ineffective, or harmful ways.

The regulatory approval process for novel product candidates such as ours can be more expensive and take longer than for other, better known, or extensively studied product candidates.

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We or any future partners may be required to perform additional or unanticipated clinical trials to obtain approval or be subject to post-marketing testing requirements to maintain regulatory approval.

If the products resulting from our Neoleukin platform and research programs prove to be ineffective, unsafe, or commercially unviable, our Neoleukin platform and pipeline would have little, if any, value, which would have a material and adverse effect on our business, financial condition, results of operations, and prospects.

Preclinical and clinical development involve a lengthy and expensive process, with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.

We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of our current product candidates or any future product candidates.

All of our product candidates are in early clinical, preclinical or earlier development and their risk of failure is high.

If the products resulting from our Neoleukin design process and research programs prove to be ineffective, unsafe, or commercially unviable, our Neoleukin design process and pipeline would have little, if any, value, which would have a material and adverse effect on our business, financial condition, results of operations, and prospects.

Development of immunotherapies involves a lengthy and expensive process, with an uncertain outcome, and results of early studies and trials may not be predictive of future trial results.

We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of any of our product candidates.

Following the decision in November 2022 to discontinue development of NL-201, all of our product candidates are now in preclinical or earlier development and their risk of failure is high.

It is impossible to predict when or if any of our product candidates will receive regulatory approval.

To obtain the requisite regulatory approvals to commercialize any product candidates, we must demonstrate through extensive preclinical studies and lengthy, complex, and expensive clinical trials that our product candidates are safe and effective in humans.

Clinical testing can take many years to complete, and its outcome is inherently uncertain.

Failure can occur at any time during the clinical trial process.

The results of preclinical studies and early clinical trials of our product candidates may not be predictive of the success of later-stage clinical trials.

Clinical testing can take many years to complete, and the outcome is inherently uncertain.

We may be unable to establish clinical endpoints that applicable regulatory authorities would consider clinically meaningful.

Failure can occur at any time during the clinical trial process, or we may decide, as we did with NL-201, to stop development for strategic reasons at any time.

The results of preclinical studies and early-stage clinical trials may not be predictive of the success of later-stage clinical trials, and differences in trial design between early-stage clinical trials and later-stage clinical trials make it difficult to extrapolate the results of earlier clinical trials to later clinical trials.

We have limited experience in designing clinical trials and may be unable to design and execute a clinical trial to support marketing approval.

The design of a clinical trial can determine whether its results will support approval of a product, and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced.

We may be unable to establish clinical endpoints that applicable regulatory authorities would consider clinically meaningful, and a clinical trial can fail at any stage of testing, and we have limited experience in designing clinical trials and may be unable to design and execute a clinical trial to support marketing approval.

Differences in trial design between early-stage clinical trials and later-stage clinical trials make it difficult to extrapolate the results of earlier clinical trials to later clinical trials.

Moreover, clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in clinical trials have nonetheless failed to obtain marketing approval of their products.

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There is typically a high rate of failure of product candidates proceeding through clinical trials.

Most product candidates that commence clinical trials are never approved as products and there can be no assurance that any of our current or future clinical trials will ultimately be successful or support clinical development of our current or any of our future product candidates.

Commencement of our future clinical trials is subject to finalizing the trial design and receiving approval from the FDA to proceed with clinical testing or similar approval from the EMA or other comparable foreign regulatory authorities.

Even after we submit our IND or comparable submissions in other jurisdictions, the FDA, EMA, or comparable foreign regulatory authorities could disagree that we have satisfied their requirements to commence our clinical trials or disagree with our study design, which may require us to complete additional preclinical studies or amend our protocols or impose stricter conditions on the commencement of clinical trials.

We may encounter substantial delays in the commencement or completion, or termination or suspension, of our clinical trials, which could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects.

We or any collaborators may experience delays in initiating or completing clinical trials or may experience numerous unforeseen events during, or as a result of, any future clinical trials that we may conduct that could delay or prevent our ability to receive marketing approval or commercialize NL-201 or any future product candidates, including:

Most product candidates that commence clinical trials are never approved as products, and there can be no assurance that any of our clinical trials will ultimately be successful or support clinical development of our product candidates.

Commencement of any future clinical trials for our product candidates is subject to finalizing the trial design and receiving approval from the FDA to proceed with clinical testing or similar approval from the EMA or other comparable foreign regulatory authorities.

Even after we submit our IND or comparable submissions in other jurisdictions, if the FDA, EMA, or comparable foreign regulatory authorities disagree that we have satisfied their requirements to commence our clinical trials or disagree with our study design, we may be required to complete additional preclinical studies or amend our protocols or impose stricter conditions on the commencement of clinical trials.

We may encounter substantial delays in the commencement or completion of our clinical trials, or may be required to terminate or suspend such trials, which could result in increased costs to us or delay or limit our ability to generate revenue, adversely affecting our commercial prospects.

If we are able to move any of our product candidates to the clinical trial stage, we may experience delays in initiating or completing clinical trials or may experience numerous unforeseen events during, or as a result of, any such future clinical trials that could delay or prevent our ability to receive marketing approval or commercialize any future product candidates, including:

• we may be unable to generate sufficient preclinical, toxicology, or other in vivo or in vitro data to obtain regulatory authorizations to commence a clinical trial;

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• clinical trial sites may deviate from trial protocol or drop out of a trial;

• clinical trials of any product candidates may fail to show safety or efficacy, produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional preclinical studies or clinical trials or we may decide to abandon product development programs;

• clinical trials of any product candidates may fail to show safety or efficacy, or may produce negative or inconclusive results, which in turn may cause us to decide, or regulators to require us, to conduct additional preclinical studies or clinical trials, or we may decide to abandon product development programs;

• the number of subjects required for clinical trials of any product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, or subjects may drop out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than we anticipate;

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• the cost of clinical trials of any of our product candidates may be greater than we anticipate;

• the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate to initiate or complete a given clinical trial;

• we may be unable to obtain or manufacture sufficient quantities of our product candidates for use in clinical trials;

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We could also encounter delays if a clinical trial is suspended or terminated by us, the IRBs of the institutions in which such trials are being conducted, or the FDA, EMA or other regulatory authorities, or if a clinical trial is recommended for suspension or termination by the Data Safety Monitoring Board, or the DSMB, for such trial.

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, 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.

For example, our IND for NL-201 was initially placed on clinical hold.

Even though the FDA removed the clinical hold on the IND for NL-201, NL-201 could be put on clinical hold again, and other future product candidates may be subject to clinical holds in the future.

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, 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, lack of adequate funding to continue the clinical trial or other reasons related to our overall business strategy.For example, prior to our discontinuation of development of NL-201, NL-201 was subject to an FDA clinical hold, which was later lifted.

Clinical studies may also be delayed or terminated as a result of ambiguous or negative interim results.

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

We do not know whether we will be able to bring any of our product candidates forward to clinical trial and, if we do, if 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 also could 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.

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

If we experience delays or difficulties in the enrollment of patients in clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

If we experience delays or difficulties in the enrollment of patients in clinical trials, our future clinical development activities could be delayed or otherwise adversely affected.

Patient enrollment, a significant factor in the timing of clinical trials, is affected by many factors including the size and nature of the patient population, the number and location of clinical sites we enroll, the proximity of patients to clinical sites, the eligibility and exclusion criteria for the trial, the design of the clinical trial, the inability to obtain and maintain patient consents, the risk that enrolled participants will drop out before completion, competing clinical trials, and clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new drugs or therapeutic biologics that may be approved for the indications being investigated by us.

The COVID 19 pandemic may also delay clinical trials if there are inadequate clinical resources for sites to safely conduct clinical research.

Furthermore, we expect to rely on our collaborators, CROs, and clinical trial sites to ensure the proper and timely conduct of our future clinical trials, including the patient enrollment process, and we have limited influence over their performance.

Additionally, we could encounter delays if treating physicians encounter unresolved ethical issues associated with enrolling patients in future clinical trials of our product candidates in lieu of prescribing existing treatments that have established safety and efficacy profiles.

If we are unable to enroll a sufficient number of patients for our clinical trials, it would result in significant delays or might require us to abandon one or more clinical trials altogether.

If we are unable to enroll a sufficient number of patients for our future clinical trials, it would result in significant delays or might require us to abandon one or more clinical trials altogether.

Enrollment delays in our clinical trials may result in increased development costs for our product candidates, slow down or halt our product candidate development and approval process and jeopardize our ability to seek and obtain the marketing approval required to commence product sales and generate revenue, which would cause the value of our company to decline and limit our ability to obtain additional financing if needed.

Interim, preliminary, and topline data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publish preliminary or topline data from our clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the more complete data related to the particular study or trial.

Preliminary, topline, and interim data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures, and such changes in the final data may be material.

From time to time, we may publish preliminary or topline data from our recently terminated or future clinical trials, which is based on a preliminary analysis of then-available data.

Those results and any related findings and conclusions are subject to change following a more comprehensive review of the more complete data related to the particular study or trial.

We also make assumptions, estimations, calculations, and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data.

As a result, the interim or preliminary results that we report may differ from future results of the same studies or clinical trials, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated.

As a result, the preliminary or topline results that we report may differ from future results of the same studies or clinical trials, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated.

Preliminary or topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary or topline data we previously published.

Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available.

As a result, interim, preliminary and topline data should be viewed with caution until the final data are available.

Adverse differences between interim, preliminary, or topline data and final data could significantly harm our reputation and business prospects.

Failure to obtain regulatory approval in international jurisdictions would prevent any future product candidates from being marketed outside the United States.

In order to market and sell our products in the European Union and other jurisdictions, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements.

Results from prespecified interim analyses that we may conduct are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available.

As a result, preliminary and topline data and prespecified interim analyses should be viewed with caution until the final data are available.

Adverse differences between preliminary, topline, or interim data and final data could significantly harm our reputation and business prospects.

Failure to obtain regulatory approval would prevent any future product candidates from being marketed.

In order to market and sell our products, we must obtain marketing approvals and comply with numerous and varying regulatory requirements.

The approval procedure varies among countries and can involve additional testing.

The time required to obtain approval may differ substantially from that required to obtain FDA approval.

The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval.

In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country.

Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries.

We may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all.

Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA.

The time required to obtain approval differs substantially from jurisdiction to jurisdiction.

In many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country.

Approval by a single regulatory authority does not ensure approval by other regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities.

A failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory approval process in others.

We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market.

If we are unable to obtain approval of any of our future product candidates by regulatory authorities in the European Union or another jurisdiction, the commercial prospects of that product candidate may be significantly diminished and our business prospects could decline.

If we are unable to obtain approval of any of our future product candidates by regulatory authorities, the commercial prospects of that product candidate may be significantly diminished and our business prospects could decline.

Recently enacted and future legislation, including potentially unfavorable pricing regulations or other healthcare reform initiatives, may increase the difficulty and cost for us to obtain marketing approval of, and commercialization of, our future product candidates and affect the prices we may obtain.

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Cost reduction initiatives and changes in coverage implemented through legislation or regulation could decrease utilization of, and reimbursement for, any approved products, which in turn could affect the price we can receive for those products.

For example, on September 9, 2021, the Biden administration published a wide-ranging list of policy proposals, most of which would need to be carried out by Congress, to reduce drug prices and drug payment.

The HHS plan includes, among other reform measures, proposals to lower prescription drug prices, including by allowing Medicare to negotiate prices and disincentivizing price increases, and to support market changes that strengthen supply chains, promote biosimilars and generic drugs, and increase price transparency.

Many similar proposals, including the plans to give Medicare Part D authority to negotiate drug prices, require drug manufacturers to pay rebates on drugs whose prices increase greater than the rate of inflation, and cap out-of-pocket costs, have already been included in policy statements and legislation currently being considered by Congress.

It is unclear to what extent these and other statutory, regulatory, and administrative initiatives will be enacted and implemented, and to what extent these or any future legislation or regulations by the Biden administration will have on our business or future product candidates.

For example, on September 9, 2021, the Biden administration published a wide-ranging list of policy proposals to lower prescription drug prices, including by allowing Medicare to negotiate prices, disincentivizing price increases, and to support market changes that strengthen supply chains, promote biosimilars and generic drugs, and increase price transparency.

These initiatives recently culminated in the enactment of the IRA in August 2022, which will, among other things, allow the U.S.

Department of Health and Human Services, or HHS, to negotiate the selling price of certain drugs and biologics that CMS reimburses under Medicare Part B and Part D, although only high-expenditure single-source drugs that have been approved for at least 7 years (11 years for biologics) can be selected by CMS for negotiation, with the negotiated price taking effect two years after the selection year.

The negotiated prices, which will first become effective in 2026, will be capped at a statutory ceiling price beginning in October 2023, penalize drug manufacturers that increase prices of Medicare Part B and Part D drugs at a rate greater than the rate of inflation.

In addition, the law eliminates the “donut hole” under Medicare Part D beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and requiring manufacturers to subsidize, through a newly established manufacturer discount program, 10% of Part D enrollees’ prescription costs for brand drugs below the out-of-pocket maximum, and 20% once the out-of-pocket maximum has been reached.

The IRA permits the Secretary of HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years.

Manufacturers that fail to comply with the IRA may be subject to various penalties, including civil monetary penalties.

The IRA also extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025.

These provisions will take effect progressively starting in 2023, although they may be subject to legal challenges.

While Medicare regulations apply only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in establishing their own coverage polices and reimbursement rates.

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The Affordable Care Act, among other things, also expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program, imposed a significant annual, nondeductible fee on companies that manufacture or import certain branded prescription drug products, and enacted substantial provisions affecting compliance, which may affect our business practices with healthcare practitioners.

Certain provisions of the Affordable Care Act have been subject to judicial and Congressional challenges to repeal or replace certain aspects of the Affordable Care Act.On June 17, 2021, the U.S.

Certain provisions of the Affordable Care Act have been subject to judicial and Congressional challenges to repeal or replace certain aspects of the Affordable Care Act.

On June 17, 2021, the U.S.

Supreme Court dismissed a challenge on procedural grounds that argued that the Affordable Care Act is unconstitutional in its entirety because the “individual mandate” was repealed by Congress.

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It is possible that the Affordable Care Act will be subject to judicial or Congressional challenges in the future.

It is uncertain how any such challenges and the healthcare measures of the Biden administration will impact the Affordable Care Act and our business, prospects, financial condition or results of operations.

In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted.

On August 2, 2011, the President signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions.

It is uncertain how any such challenges and the healthcare measures of the Biden administration will impact the Affordable Care Act and in turn our business, prospects, financial condition, or results of operations.

Other legislative measures impacting federal expenditures on health care may also have an adverse impact on our business.

For example, on August 2, 2011, President Obama signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions.

The Joint Select Committee did not achieve a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering the legislation’s automatic reduction to several government programs.

This includes aggregate reductions to Medicare payments to providers of up to 2% per fiscal year that went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022 due to the COVID-19 pandemic, unless additional Congressional action is taken.

The Medicare reductions phase back in starting with a 1% reduction in effect from April 1, 2022 to June 30, 2022 before increasing to the full 2% reduction.

On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

This includes aggregate reductions to Medicare payments to providers of up to 2% per fiscal year that went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030, with the exception of a temporary suspension followed by reduction from May 1, 2020 through June 30, 2022 due to the COVID-19 pandemic, unless additional Congressional action is taken.

In addition, on January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

These laws may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on our customers and accordingly, our financial operations.

Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products.

Furthermore, there has been heightened governmental scrutiny recently over the manner in which manufacturers set prices for their marketed products.

For example, there have been several recent Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer’s patient programs, and reform government program reimbursement methodologies for drug products.

Legislative and regulatory proposals have also been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products.

Furthermore, in the past few years there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, including Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer’s patient programs, and reform government program reimbursement methodologies for drug products.

We cannot be sure whether additional legislative changes will be enacted, or whether existing regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our future product candidates, if any, may be.

In the United States, the European Union and other potentially significant markets for our future product candidates, government authorities and third-party payors are increasingly attempting to limit or regulate the price of medical products and services, particularly for new and innovative products and therapies, which has resulted in lower average selling prices.

Furthermore, the increased emphasis on managed healthcare in the United States and on country and regional coverage, pricing and reimbursement controls in the European Union will put additional pressure on product coverage, pricing, reimbursement and utilization, which may adversely affect our business, results of operations, financial condition and cash flows and future prospects.

Furthermore, the increased emphasis on managed healthcare in the United States and on country and regional coverage, pricing, and reimbursement controls in the European Union will put additional pressure on product coverage, pricing, reimbursement, and utilization, which may adversely affect our business, results of operations, financial condition, cash flows, and future prospects.

These pressures can arise from various sources, including but not limited to, rules and practices of managed care groups, judicial decisions and governmental laws and regulations related to Medicare, Medicaid and healthcare reform, pharmaceutical reimbursement policies, and pricing in general.

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individual or business from paying, offering, authorizing payment, or offering anything of value, directly or indirectly, to any foreign official, political party, or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business.

The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring us to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.

The FCPA also obligates companies whose securities are listed in the United States to comply with certain accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.

The anti-bribery provisions of the FCPA are enforced primarily by the U.S.

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Compliance with the FCPA is expensive and difficult, particularly in countries in which corruption is a recognized problem.

In addition, the FCPA presents particular challenges in the pharmaceutical industry, because, in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials.

In addition, the FCPA presents particular challenges in the pharmaceutical industry because in many countries hospitals are operated by the government, and therefore doctors and other hospital employees are considered foreign officials.

Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.

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We do not currently have an infrastructure for the sales, marketing, and distribution of pharmaceutical drug products, and the cost of establishing and maintaining such an infrastructure may exceed the cost-effectiveness of doing so.

In addition, NL-201 is our only product candidate in clinical development, and such clinical development is in the early stages.

If we are able to successfully advance NL-201 through clinical development or to identify and establish other product candidates and advance them through clinical development, in order to market any products that may ultimately be approved by the FDA and comparable foreign regulatory authorities, we must build our sales, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services.

In addition, following the decision to discontinue development ofNL-201 in November 2022, we do not have any product candidates in clinical development.

If we are able to successfully advance any of our future product candidates through clinical development to approval by the FDA and comparable foreign regulatory authorities, we will need to either build our sales, marketing and distribution operations, including managerial and other non-technical capabilities, or make arrangements with third parties to perform these services.

If we are unable to establish adequate sales, marketing, and distribution capabilities, whether independently or with third parties, we may not be able to generate product revenue and may not become profitable.

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Even if we are able to effectively hire a sales force and develop a marketing and sales infrastructure, our sales force and marketing team may not be successful in commercializing our product candidates, which would negatively affect our ability to generate revenue.

We may not be successful in our efforts to use our Neoleukin platform to expand our pipeline of product candidates and develop marketable products.

The success of our business depends in part upon our ability to discover, develop, and commercialize products based on our Neoleukin platform, which may fail to identify other potential product candidates for clinical development for a number of reasons.

We may not be successful in our efforts to use our Neoleukin design process to expand our pipeline of product candidates and develop marketable products.

The success of our business depends in part upon our ability to discover, develop, and commercialize products based on our Neoleukin design process, which may fail to identify other potential product candidates for clinical development for a number of reasons.

Our research methodology may be unsuccessful in identifying potential product candidates or our potential product candidates may be shown to have harmful side effects or may have other characteristics that may make the products unmarketable or unlikely to receive marketing approval.

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We may expend our limited resources to pursue a particular product candidate and fail to capitalize on product candidates that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we focus our research and development efforts on our lead product candidate, NL-201, with initial indications including renal cell carcinoma and melanoma.

As a result, we may forgo or delay pursuit of opportunities with other product candidates that later prove to have greater commercial potential.

Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities.

Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable product candidates.

Because we have limited financial and managerial resources, we must choose the product candidates on which we focus our research and development efforts, which may require us to forgo or delay pursuit of opportunities with other product candidates that may ultimately have greater commercial potential.

For instance, prior to November 2022, we were primarily focused on developing our lead product candidate, NL-201, and invested significant resources in the preclinical and Phase 1 clinical trial for that product candidate, but ultimately decided that our limited resources would be better spent on early stage research of the next generation de novo protein design and so elected to discontinue development of NL-201 even though that product candidate had demonstrated on target activity in reviews of preliminary data.

Our resource allocation decisions may require us to make strategic decisions, which in turn may cause us to fail to capitalize on viable commercial products or profitable market opportunities.

Our spending on research and development programs and product candidates for specific indications may not yield any commercially viable product candidates.

If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing, or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

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Our commercial opportunity and success will be reduced or eliminated if competing products are safer, more effective, or less expensive than the therapeutics we develop.

Our lead product candidate, NL-201, is under development for the treatment of advanced solid tumors, including melanoma and renal cell carcinoma.

If approved, it would face competition from approved advanced melanoma and renal cell carcinoma treatments, including multiple checkpoint inhibitors, tyrosine kinase inhibitors, VEGF inhibitors, recombinant human IL-2, and several chemotherapy drugs or combinations.

Further, we are aware of several IL-2 or IL-15 agonists in various stages of clinical and preclinical development.

Many of our competitors have significantly greater financial, technical, manufacturing, marketing, sales, and supply resources or experience than we have.

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Such competitors could also recruit our employees, which could negatively impact our level of expertise and our ability to execute our business plan.

We expect the product candidates we develop will be regulated as biological products, or biologics, and therefore they may be subject to competition sooner than anticipated.

Any product candidates we develop that are regulated as biological products, or biologics, may be subject to competition sooner than anticipated.

Our product candidates may face competition from other products that are the same as or similar to ours.

If the FDA or comparable foreign regulatory authorities approve biosimilar versions of our product candidates, or such authorities do not grant our products appropriate periods of regulatory exclusivity, the sales of our products could be adversely impacted.

For any product candidates that are biological products, if the FDA or comparable foreign regulatory authorities approve biosimilar versions of those product candidates, or such authorities do not grant our products appropriate periods of regulatory exclusivity, the sales of those products could be adversely impacted.

The Biologics Price Competition and Innovation Act of 2009, or the BPCIA, was enacted as part of the Affordable Care Act to establish an abbreviated pathway for the approval of biosimilar biological products (both highly similar and interchangeable biosimilar biological products).

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In the future, we may decide to pursue accelerated approval for one or more of our product candidates.

Under the FDA’s accelerated approval program, the FDA may approve a drug for a serious or life-threatening disease or condition that provides a meaningful advantage over available therapies based upon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit.

For drugs granted accelerated approval, post-marketing confirmatory trials are required to verify and describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit.

Under the FDA’s accelerated approval program, the FDA may approve a drug or biological product for a serious or life-threatening disease or condition that provides a meaningful advantage over available therapies based upon a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit.

For products granted accelerated approval, post-marketing confirmatory trials are required to verify and describe the anticipated effect on irreversible morbidity or mortality or other clinical benefit.

These confirmatory trials must be completed with due diligence, and the FDA may require that the trial be designed, initiated, and/or fully enrolled prior to approval.

If we were to pursue accelerated approval for a product candidate for a disease or condition, we would do so on the basis that there is no available therapy for that disease or condition.

If any of our competitors were to receive full approval on the basis of a confirmatory trial for a drug for a disease or condition for which we are seeking accelerated approval before we receive accelerated approval, the disease or condition would no longer qualify as one for which there is no available therapy, and accelerated approval of our product candidate would not occur.

If standard of care were to evolve or if any of our competitors were to receive full approval on the basis of a confirmatory trial for a drug or biological product for a disease or condition for which we are seeking accelerated approval before we receive accelerated approval, the disease or condition would no longer qualify as one for which there is no available therapy, and accelerated approval of our product candidate would not occur.

Many cancer therapies rely on accelerated approval, and the treatment landscape can change quickly as the FDA converts accelerated approvals to full approvals on the basis of successful confirmatory trials.

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• we disseminate false or misleading promotional materials relating to the relevant product candidate.

Recently, the accelerated approval pathway has come under scrutiny within the FDA and by Congress.

The FDA has put increased focus on ensuring that confirmatory studies are conducted with diligence and, ultimately, that such studies confirm the benefit.

For example, FDA has convened its Oncologic Drugs Advisory Committee to review what the FDA has called dangling or delinquent accelerated approvals where confirmatory studies have not been completed or where results did not confirm benefit.

In addition, the Oncology Center of Excellence has recently announced Project Confirm, which is an initiative to promote the transparency of outcomes related to accelerated approvals for oncology indications and provide a framework to foster discussion, research and innovation in approval and post-marketing processes, with the goal to enhance the balance of access and verification of benefit for therapies available to patients with cancer and hematologic malignancies.

Furthermore, in addition, Congress is considering various proposals to potentially make changes to the accelerated approval pathway, including proposals to increase the likelihood of withdrawal of approval in such circumstances.

Risks Related to Our Reliance on Third Parties

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If those third parties do not perform as contractually required, fail to satisfy legal or regulatory requirements, miss expected deadlines or terminate the relationship, our development program could be delayed with potentially material and adverse effects on our business, financial condition, results of operations, and prospects.

We currently rely and intend to continue to rely in the future on third-party clinical investigators, CROs, clinical data management organizations, and consultants to assist or provide the design, conduct, supervision, and monitoring of preclinical studies and clinical trials of our product candidates.

Because we rely on and intend to continue to rely on these third parties and will not have the ability to conduct all preclinical studies or clinical trials independently, we will have less control over the timing, quality, and other aspects of preclinical studies and clinical trials than we would have had we conducted them on our own.

Although we have agreements governing the activities of third parties, these investigators, CROs, and consultants will not be our employees, and we will have limited control over the amount of time and resources that they dedicate to our programs.

We rely on third-party clinical investigators, CROs, clinical data management organizations, and consultants to assist or provide the design, conduct, supervision, and monitoring of preclinical studies and clinical trials of our product candidates, including certain third parties who will continue to assist in the wind-down of our NL-201 Phase 1 clinical trial.

To the extent we rely on these third parties, we will have less control over the timing, quality, and other aspects of certain preclinical studies and clinical trials than we would have had we conducted them on our own.

Although we have agreements governing the activities of third parties, consultants are not and will not be our employees, and we will have limited control over the amount of time and resources that they dedicate to our programs.

These third parties may have contractual relationships with other entities, some of which may be our competitors, which may draw time and resources from our programs.

The third parties with which we may contract might not be diligent, careful, or timely in conducting our preclinical studies or clinical trials, resulting in the preclinical studies or clinical trials being delayed or unsuccessful.

If we cannot contract with acceptable third parties on commercially reasonable terms, or at all, or if these third parties do not carry out their contractual duties, satisfy legal and regulatory requirements for the conduct of preclinical studies or clinical trials or meet expected deadlines, our clinical development programs could be delayed and otherwise adversely affected.

The third parties with which we may contract might not be diligent, careful, or timely in conducting our development work,preclinical studies or clinical trials, which could result in such work being delayed or unsuccessful.

If we cannot contract with acceptable third parties on commercially reasonable terms, or at all, or if these third parties do not carry out their contractual duties, satisfy applicable legal and regulatory requirements or meet expected deadlines, ourdevelopment programs could be delayed and otherwise adversely affected.

In all events, we will be responsible for ensuring that each of our preclinical studies and clinical trials are conducted in accordance with the general investigational plan and protocols for the trial as well as applicable legal and regulatory requirements.

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We do not own or operate facilities for drug manufacturing, storage, distribution, or quality testing.

We currently rely, and expect to continue to rely, on third-party contract manufacturers to manufacture bulk drug substances, drug products, raw materials, samples, components, or other materials and reports, and conduct fill-finish services.

We therefore must rely on third-party contract manufacturers to manufacture bulk drug substances, drug products, raw materials, samples, components, or other materials and reports, and conduct fill-finish services.

Reliance on third-party manufacturers may expose us to different risks than if we were to manufacture product candidates ourselves.

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Additionally, raw materials and components used in the manufacturing process, particularly those for which we have no other source or supplier, may not be available or may not be suitable or acceptable for use due to material or component defects, may be in short supply, and may significantly increase in price.

There can be no assurance that our preclinical and clinical development product supplies will not be limited, available at acceptable prices.

There can be no assurance that our preclinical and clinical development product supplies will not be limited, or that they will be available at acceptable prices, if at all.

In particular, any replacement of our manufacturer could require significant effort and expertise because there may be a limited number of qualified replacements.

In addition, global supply chain disruption may hamper our ability to source materials needed for our research and development, including our preclinical trial programs, may increase our costs due to scarcity or may require us to buy materials on spec in advance of when we need it, which may impact our ability to budget or forecast expenditures, and may also hamper our ability to complete our preclinical trials on time, or at all.

The manufacturing process for a product candidate is subject to review by the FDA, EMA, or other applicable regulatory authorities.

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Moreover, although we do not control the manufacturing process at our contract manufacturers and are completely dependent on them for compliance with current regulatory requirements, we are responsible for ensuring that our products comply with regulatory requirements.

If any of our manufacturers fails to comply with such requirements or to perform its obligations in relation to quality, timing or otherwise, or if our supply of components or other materials becomes limited or interrupted for other reasons, we may be forced to enter into an agreement with another third party, which we may not be able to do on reasonable terms, if at all.

In some cases, the technical skills or technology required to manufacture our product candidates may be unique or proprietary to the original manufacturer and we may have difficulty transferring such to another third party.

These factors would increase our reliance on such manufacturer or require us to obtain a license from such manufacturer in order to enable us, or to have another third party, manufacture our product candidates.

If we are required to change manufacturers for any reason, we will be required to verify that the new manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations and guidelines;

and we may be required to repeat some of the development program.

The delays associated with the verification of a new manufacturer could negatively affect our ability to develop product candidates in a timely manner or within budget.

The costs and delays associated with the verification of a new manufacturer could negatively affect our ability to develop product candidates in a timely manner or within budget.

We expect to continue to rely on third-party manufacturers if we receive regulatory approval for any product candidate.

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Additionally, our contract manufacturers may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments.

For example, the outbreak of COVID-19 has spread across the globe and has resulted in extended shutdowns of businesses in the United States, Canada and many other countries and has had ripple effects to businesses around the world.

Global health concerns, such as the COVID-19 pandemic, could also result in adverse effects to our manufacturing operations, including our ability to source raw materials and reagents.

For example, the global outbreak of the COVID-19 pandemic resulted in extended shutdowns of businesses in the United States, Canada, and many other countries andhad ripple effects to businesses around the world.

Global health concerns, such as the COVID-19 pandemic, and the ensuing impacts on financial markets and supply chain logistics could also result in adverse effects to our manufacturing operations, including our ability to source raw materials and reagents.

If our contract manufacturers were to encounter any of these difficulties, our ability to provide our product candidates to patients in preclinical and clinical trials, or to provide product for treatment of patients once approved, would be jeopardized.

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We cannot assure you that any stability or other issues relating to the manufacture of any of our product candidates or products will not occur in the future.

Our de novo protein product candidates may not demonstrate sufficient long-term stability to support a BLA filing or obtain approval, or the product shelf life may be limited by stability results.

Our de novo protein product candidates may not demonstrate sufficient long-term stability to support a BLA submission or obtain approval, or the product shelf life may be limited by stability results.

Poor control of production processes can lead to the introduction of adventitious agents or other contaminants, or to inadvertent changes in the properties or stability of our product candidates that may not be detectable in final product testing.

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Risks Related to Our Business and Operations

The continued impact of the novel strain of coronavirus, SARS-CoV-2, which causes COVID-19 disease, could adversely impact our business, including our preclinical and clinical development activities.

Public health crises such as pandemics or similar outbreaks could adversely impact our business.

The outbreak of a novel strain of coronavirus, which causes the disease called COVID-19, is a global pandemic.

As a result of the COVID-19 pandemic, including the resurgence of cases relating to the spread of the Delta and Omicron variants, or similar pandemics, we may experience disruptions that could severely impact our business, manufacturing, preclinical development activities, preclinical studies and existing and planned clinical trial activities, including:

• delays or disruptions in preclinical development activities, including non-clinical experiments and investigational new drug application-enabling GLP standard toxicology studies due to unforeseen circumstances in supply chain;

• interruption or delays in the operations of the FDA and comparable foreign regulatory agencies, which may impact timelines for regulatory submission, trial initiation, and regulatory approval;

• interruption or delays in our CROs and collaborators meeting expected deadlines or complying with regulatory requirements related to preclinical development activities, preclinical studies, and clinical trial activities;

• interruptions of, or delays in receiving, supplies of our product candidates from our contract manufacturing organizations due to staffing shortages, productions slowdowns, limited availability of raw materials, or stoppages and disruptions in delivery systems;

• delays or difficulties in any planned clinical site initiation, including difficulties in obtaining IRB approvals, recruiting clinical site investigators and clinical site staff;

• delays or difficulties in enrolling patients in clinical trials;

• increased rates of patients withdrawing from any planned clinical trials following enrollment as a result of contracting COVID-19 or being forced to quarantine;

• diversion of healthcare resources away from the conduct of our preclinical development activities, preclinical studies and planned clinical trials, including the diversion of hospitals serving as clinical trial sites and potential clinical trial sites, and hospital staff supporting the conduct of clinical trial activities;

• interruption of planned key clinical trial activities, such as clinical trial site data monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others or interruption of clinical trial subject visits and study procedures (particularly any procedures that may be deemed non-essential), which may impact the integrity of subject data and planned clinical study endpoints;

• limitations on employee or collaborator resources that would otherwise be focused on the conduct of our preclinical development activities, preclinical studies and clinical trial activities, including because of sickness of employees or their families, the desire of employees to avoid contact with large groups of people, an increased reliance on working from home or mass transit disruptions;

• reduced ability to engage with the medical and investor communities due to the cancellation of conferences scheduled throughout the year.

These and other factors arising from the COVID-19 pandemic could worsen in countries afflicted with COVID-19, or could return to countries where the pandemic has been partially contained, each of which could further adversely impact our ability to conduct preclinical development activities, preclinical studies and clinical trial activities and our business generally, and could have a material adverse impact on our operations and financial condition and results.

In addition, the trading prices for our common stock and other biopharmaceutical companies, as well as the broader equity and debt markets, have been highly volatile as a result of the COVID-19 pandemic and the resulting impact on economic activity.

As a result, we may face difficulties raising capital when needed, and any such sales may be on unfavorable terms to us.

Further, to the extent we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of existing stockholders will be diluted.

The extent to which the COVID-19 pandemic may impact our business, manufacturing, preclinical development activities, preclinical studies and clinical trial activities and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of COVID-19, the duration of the pandemic, the potential for a second pandemic after it is contained, travel restrictions and actions to address the pandemic or treat its impact, such as social distancing and quarantines or lock-downs in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

We will need to grow our organization, and we may experience difficulties in managing our growth and expanding our operations, which could adversely affect our business.

As of December 31, 2021, we had approximately 91 full-time employees.

As our development and commercialization plans and strategies develop, we expect to expand our employee base for managerial, operational, financial and other resources.

In addition, we have limited experience in product development.

As our product candidates enter and advance through preclinical studies and clinical trials, we will need to expand our development and regulatory capabilities and contract with other organizations to provide manufacturing and other capabilities for us.

In the future, we expect to have to manage additional relationships with collaborators or partners, suppliers, and other organizations.

Our ability to manage our operations and future growth will require us to continue to improve our operational, financial, and management controls, reporting systems, and procedures.

We may experience difficulties in preparing our operations for potential future growth, which could adversely affect our business.

As of December 31, 2022, we had approximately 56 full-time employees, and in March 2023 announced a further corporate restructuring that reduced our headcount by approximately 70% of the workforce in place at that time.

We have also announced a shift to focusing on strategic alternatives for the Company and a suspension of our research and development programs in connection with that restructuring.

If we are successful in completing a strategic transaction in the future, we expect that we will need to invest in additional growth for the Company, which may include potentially expanding our development and regulatory capabilities, contracting with other organizations to provide manufacturing and other capabilities for us, and managing additional relationships with collaborators or partners, suppliers, and other organizations.

Our ability to prepare for future growth will require us to continue to improve our operational, financial, and management controls, reporting systems, and procedures.

We may not be able to implement improvements to our management information and control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls.

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Any inability to attract and retain qualified key management and technical personnel would impair our ability to implement our business plan.

We have experienced high turnover in the past year, and will rely on our remaining employees to execute any strategic alternatives the Board may approve under the current plan.

The changes in our strategic direction and in our workforce may make retention of our current personnel both more important and more challenging.

We cannot guarantee that we will be able to retain key employees necessary to carry out our revised strategic plan, and if such employees were to leave, we may not be able to identify and hire the personnel we need to replace them.

Our success largely depends on the continued service of key management, advisors, and other specialized personnel.

We currently do not maintain key person insurance on any of these individuals.

The loss of one or more members of our management team or other key employees or advisors could delay our research and development programs and have a material and adverse effect on our business, financial condition, results of operations, and prospects.

The relationships that our key managers have cultivated within our industry make us particularly dependent upon their continued employment with us.

We are dependent on the continued service of our technical personnel because of the highly technical nature of our product candidates and technologies related to our Neoleukin platform, and the specialized nature of the regulatory approval process.

The loss of one or more members of our management team or other key employees or advisors could delay any strategic initiative we may elect to pursue, and have a material and adverse effect on our business, financial condition, results of operations, and prospects.

Because our management team and key employees are not obligated to provide us with continued service, they could terminate their employment with us at any time without penalty.

If we are successful in completing a strategic transaction, we will need to retain the key managers, scientists and personnel necessary for the future growth of the Company following such transaction.

Competition for skilled personnel in our market is intense and may limit our ability to hire and retain highly qualified personnel on acceptable terms or at all.

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If we are unable to continue to attract and retain high-quality personnel, the rate and success at which we can discover and develop product candidates will be limited which could have a material and adverse effect on our business, financial condition, results of operations, and prospects.

Our relationships with healthcare professionals, principal investigators, consultants, customers (actual and potential) and third-party payors are and will be subject, directly and indirectly, to applicable anti-kickback, fraud and abuse, privacy, transparency and other healthcare laws and regulations, which could expose us to penalties, including without limitation, civil, criminal and administrative sanctions, civil penalties, damages, fines, disgorgement, individual imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, integrity obligations, contractual damages, reputational harm, administrative burdens and diminished profits and future earnings and the curtailment or restructuring of our operations.

Our relationships with healthcare professionals, principal investigators, consultants, customers (actual and potential) and third-party payors are and will be subject, directly and indirectly, to applicable anti-kickback, fraud and abuse, privacy, transparency, and other healthcare laws and regulations, which could expose us to penalties, including without limitation, civil, criminal, and administrative sanctions, civil penalties, damages, fines, disgorgement, individual imprisonment, possible exclusion from participation in Medicare, Medicaid, and other federal healthcare programs, integrity obligations, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, and the curtailment or restructuring of our operations.

As a biopharmaceutical company, even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid, or other third-party payors, federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our future arrangements with third-party payors and customers who are in a position to purchase, recommend, and/or prescribe our product candidates for which we obtain marketing approval.

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Restrictions under applicable federal and state healthcare laws and regulations that may affect our ability to operate include, but are not limited to, the following:

• the federal Anti-Kickback Statute, which, among other things, prohibits persons from knowingly and willfully soliciting, offering, receiving or providing paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid;

• federal civil and criminal false claims laws, including the federal civil False Claims Act, and civil monetary penalty laws impose criminal and civil penalties, including through civil whistleblower or qui tam actions, among other things, prohibits individuals or entities from knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment or approval that are false or fraudulent or from knowingly making a false statement to improperly avoid, decrease or conceal an obligation to pay money to the federal government;

• HIPAA, which, among other things, imposes criminal liability for knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g.

public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of or payment for healthcare benefits, items or services relating to healthcare matters;

• HIPAA, as amended by HITECH, and its implementing regulations, which also imposes certain obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information without the appropriate authorization by entities subject to the law, such as health plans, healthcare clearinghouses and healthcare providers;

• the federal Anti-Kickback Statute, which, among other things, prohibits persons from knowingly and willfully soliciting, offering, receiving, providing, or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order, or recommendation of, any good, facility, item, or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid;

• federal civil and criminal false claims laws, including the federal civil False Claims Act, and civil monetary penalty laws which impose criminal and civil penalties, including through civil whistleblower or qui tam actions, and, among other things, prohibit individuals or entities from knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment or approval that are false or fraudulent, or from knowingly making a false statement to improperly avoid, decrease, or conceal an obligation to pay money to the federal government;

• the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which, among other things, imposes criminal liability for knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of or payment for healthcare benefits, items, or services relating to healthcare matters;

• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and its implementing regulations, which also imposes certain obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security, and transmission of individually identifiable health information without the appropriate authorization by entities subject to the law, such as health plans, healthcare clearinghouses, and healthcare providers;

• the federal Physician Payments Sunshine Act and its implementing regulations, which requires certain manufacturers of drugs, devices, biologics, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program (with certain exceptions) to report annually to CMS information related to “payments or other transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors), physician assistants, certain types of advance practice nurses, and teaching hospitals, and applicable manufacturers and applicable group purchasing organizations to report annually to CMS ownership and investment interests held by physicians (as defined above) and their immediate family members and payments or other “transfers of value” to such physician owners and their immediate family members;

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

If our operations are found to be in violation of any of these laws or any other governmental laws and regulations that may apply to us, we may be subject to penalties, including without limitation, significant civil, criminal and administrative penalties, damages, fines, disgorgement, individual imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, integrity obligations, contractual damages, reputational harm, administrative burdens and diminished profits and future earnings, and the curtailment or restructuring of our operations.

If our operations are found to be in violation of any of these laws or any other governmental laws and regulations that may apply to us, we may be subject to penalties, including without limitation, significant civil, criminal, and administrative penalties, damages, fines, disgorgement, individual imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, integrity obligations, contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, and the curtailment or restructuring of our operations.

If any physicians or other healthcare providers or entities with whom we expect to do business are found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

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net operating losses, or NOLs, of $124.9 million, for federal tax purposes, for which we have recorded a full valuation allowance, and R&D credit carryovers of $3.9 million, which may be offset by future taxable income.

The R&D credit carryforwards and certain of our NOL carryforwards will expire in various years beginning in 2028, if not utilized.

The R&D credit carryforwards and certain of our NOL carryforwards will expire in various years beginning in 2028 if not used.

Unused losses incurred in taxable years beginning on or prior to December 31, 2017 will carry forward to offset future taxable income, if any, until such unused losses expire.

Under the Tax Cuts and Jobs Act, as modified by the CARES Act, unused U.S.

federal NOLs generated in tax years beginning after December 31, 2017, will not expire and may be carried forward indefinitely but the deductibility of such federal NOLs (particularly those generated in taxable years beginning after December 31, 2020) in taxable years beginning after December 31, 2020, is limited to 80% of current year taxable income.

federal NOLs generated in tax years beginning after December 31, 2017, will not expire and may be carried forward indefinitely, but the deductibility of such federal NOLs (particularly those generated in taxable years beginning after December 31, 2020) is limited to 80% of current year taxable income.

It is uncertain if and to what extent various states will conform to the Tax Cuts and Jobs Act or the CARES Act.

Furthermore, utilization of certain of our NOLs and R&D credit carryforwards will be subject to annual limitations on their use as a result of ownership changes under the rules of Sections 382 and 383 of the Internal Revenue Code, or the Code that have historically occurred.

Furthermore, use of certain of our NOLs and R&D credit carryforwards will be subject to annual limitations on their use as a result of ownership changes under the rules of Sections 382 and 383 of the Internal Revenue Code, or the Code that have historically occurred.

Based on our Section 382 analysis to date, we underwent ownership changes in August 2015 and August 2019.

As a result of these ownership changes, we believe that certain of our NOLs will be likely to expire before they are able to be utilized under Section 382.

As a result of these ownership changes, we believe that certain of our NOLs will be likely to expire before they are able to be used under Section 382.

In addition, we may experience ownership changes in the future as a result of future changes in our stock ownership, some of which changes are outside of our control, and as a result, our ability to utilize NOL and R&D credit carryforwards could become further limited under Sections 382 and 383, and the tax benefits related to our NOLs and R&D credits may be diminished or lost.

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Risks Related to Intellectual Property

If we are not able to obtain, maintain, and enforce patent protection and other intellectual property rights for our product candidates, our Neoleukin platform technology, or other proprietary technologies we may develop, development and commercialization of our product candidates may be adversely affected.

If we are not able to obtain, maintain, and enforce patent protection and other intellectual property rights for our product candidates, our Neoleukin design process technology, or other proprietary technologies we may develop, the development and commercialization of our product candidates may be adversely affected.

Our success depends in part on our ability to obtain and maintain patents and other forms of intellectual property rights, including in-licenses of intellectual property rights of others, for our product candidates, as well as our ability to preserve our trade secrets, to prevent third parties from infringing upon our proprietary rights and to operate without infringing upon the proprietary rights of others.

Under our License Agreement with the University of Washington, dated July 8, 2019, as amended on October 29, 2020, effective July 24, 2020, and again on December 27, 2021, effective December 15, 2021 we have an exclusive license to develop and commercialize products covered by patent applications with claims covering the composition of matter of key molecule families as well as methods of using the computational algorithms that form the basis of the Neoleukin platform.

However, we may not be able to apply for patents on certain aspects of our product candidates in a timely fashion or at all.

Under our License Agreement with the University of Washington, dated July 8, 2019, as amended on October 29, 2020, effective July 24, 2020, and again on December 27, 2021, effective December 15, 2021, we have an exclusive license to develop and commercialize products covered by patent applications with claims covering the composition of matter of certain molecule families as well as methods of using the computational algorithms that form the basis of the Neoleukin design process.

However, we may not be able to apply for patents on certain aspects of our product candidates or methods in a timely fashion or at all.

Further, we may not be able to prosecute all necessary or desirable patent applications, or maintain, enforce, and license any patents that may issue from such patent applications, at a reasonable cost or in a timely manner.

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• market conditions in the pharmaceutical and biotechnology sectors;

• general economic, industry and market conditions, including market volatility and economic uncertainty related to the COVID-19 pandemic.

• general economic, industry and market conditions, such as market volatility and economic uncertainty due to rising interest rates, inflation, the war in Ukraine, and the COVID-19 pandemic.

In addition, the stock market in general, and pharmaceutical and biotechnology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies.

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These choice of forum provisions may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims.

Alternatively, if a court were to find the choice of forum provisions contained in our restated certificate of incorporation or amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition.

Alternatively, if a court were to find the choice of forum provisions contained in ourcertificate of incorporation or bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition.

We are no longer an “emerging growth company,” however, we are still a “smaller reporting company,” and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors.

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In the ordinary course of our business, we collect, store, and transmit confidential information, including intellectual property, proprietary business information and personal information.

Despite the implementation of appropriate security measures, our internal computer and information systems and those of our current and any future CROs, and other contractors or consultants may become vulnerable to damage from security incidents (such as data breaches, viruses or other malicious code, coordinated attacks, data loss, phishing attacks, ransomware, denial of service attacks, or other security or information technology incidents caused by threat actors, technological vulnerabilities or human error), natural disasters, terrorism, war, and telecommunication/electrical failures.

While we have not experienced any such material system failure or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations.

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To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, our competitive position could be harmed, and the further development and commercialization of our product candidates could be significantly delayed.

Our internal and outsourced information technology systems and infrastructure are also vulnerable to damage from natural disasters, terrorism, war, telecommunication and electrical failures.

Our internal and outsourced information technology systems and infrastructure are also vulnerable to damage from natural disasters, terrorism, war, including Russia's recent invasion of Ukraine, telecommunication and electrical failures.

System failures or outages, including any potential disruptions due to significantly increased global demand on certain cloud-based systems during the COVID-19 pandemic, could compromise our ability to perform our day-to-day operations, which could harm our ability to conduct business or delay our financial reporting.

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Further, any significant uninsured liability may require us to pay substantial amounts, which would adversely affect our business, results of operations, financial condition and cash flows from future prospects.

Unfavorable global economic conditions or other geopolitical developments could adversely affect our business, financial condition, stock price, and results of operations.

In addition, our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets.

For example, the global financial crisis of 2007-2008 caused extreme volatility and disruptions in the capital and credit markets.

Likewise, the capital and credit markets may be adversely affected by the recent conflict between Russia and Ukraine, and the possibility of a wider European or global conflict, and global sanctions imposed in response thereto.

A severe or prolonged economic downturn, such as the global financial crisis, could result in a variety of risks to our business, including a decrease in the demand for our drug candidates and in our ability to raise additional capital when needed on acceptable terms, if at all.

A weak or declining economy also could strain our suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our services.

Further, the conflict in Ukraine could increase incidences of cybersecurity attacks against companies in the United States as retaliation for sanctions levied against Russia, which could increase our risk of being the subject of such an attack.

We cannot anticipate all of the ways in which the foregoing, and the current economic climate, financial market conditions and geopolitical developments generally, could adversely impact our business.

Furthermore, our stock price may decline due in part to the volatility of the stock market and any general economic downturn.

We have incurred and will incur increased costs as a result of operating as a public company, and our management is required to devote substantial time to new compliance initiatives.

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Moreover, these rules and regulations have substantially increased our legal and financial compliance costs and made some activities more time-consuming and costly.

The increased costs will increase our consolidated net loss.

The increased costs will increase our net loss.

We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements.

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

What changed 10-K

Item 1A. Risk Factors