Oruka Therapeutics, Inc. 10-K

Item 1. Business Some of the statements under “Business,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Annual Report constitute forward-looking statements. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Examples of these statements include, but are not limited to, statements regarding the following: potential future development plans for rNAPc2 (AB201) and Gencaro, including the potential for rNAPc2 to treat COVID-19, our ability to secure sufficient financing to support our anticipated clinical trials of rNAPc2 and Gencaro, the likelihood that any Phase 3 clinical trial results for Gencaro will satisfy the requirements of our Special Protocol Assessment agreement, the expected features and characteristics of Gencaro, including the potential for genetic variations to predict individual patient response to Gencaro or AB171, Gencaro’s potential to treat atrial fibrillation, or AF, future vaccines and treatment options for patients with COVID-19, future treatment options for patients with AF, the potential for Gencaro to be the first genetically-targeted AF prevention treatment, statements regarding potential Phase 3 development plans for Gencaro, including the timing and results thereof, the expected features and characteristics of AB171 as a potential genetically-targeted treatment for peripheral arterial disease, or PAD, and for heart failure, or HF, the potential timeline for development of AB171, including any Investigational New Drug, or IND, application submission related thereto, and the ability of ARCA’s financial resources to support its operations through the end of fiscal year 2022, the sufficiency of our current capital to reach certain of our corporate objectives, our ability to obtain additional funding when needed or enter into a strategic or other transaction, including our ability to raise sufficient capital to fund any clinical trials for rNAPc2 and Gencaro and our other operations, the extent to which our issued and pending patents may protect our products and technology, the potential of such product candidates to lead to the development of safe or effective therapies, our ability to enter into collaborations, our ability to maintain listing of our common stock on a national exchange, our future operating expenses, our future losses, our future expenditures, and the sufficiency of our cash resources to maintain operations. Actual results and performance could differ materially from those projected in the forward-looking statements as a result of many factors discussed herein and elsewhere. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. While we believe that we have a reasonable basis for each forward-looking statement contained in this Annual Report, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. In addition, you should refer to the “Risk Factors” section of this Annual Report for a discussion of other important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Annual Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and our website. The terms “ARCA,” “the Company,” “we,” “us,” “our” and similar terms refer to ARCA biopharma, Inc. Overview We are a clinical-stage biopharmaceutical company applying a precision medicine approach to the development and commercialization of targeted therapies for cardiovascular diseases. Precision medicine refers to the tailoring of medical treatment to the individual characteristics of patients, using genomic, non-genomic biomarker and other information that extends beyond routine diagnostic categorization. We believe that when implemented correctly precision medicine can enhance therapeutic response, improve patient outcomes, and reduce healthcare costs. Our lead product candidates are rNAPc2 (AB201) as a potential treatment for diseases caused by ribonucleic acid, or RNA, viruses, initially focusing on COVID-19, the disease syndrome caused by the SARS-CoV-2 virus, and Gencaro™ (bucindolol hydrochloride) for the treatment of atrial fibrillation, or AF, in patients with chronic heart failure, or HF. rNAPc2 targets COVID-19 patients with biomarker evidence of coagulopathy, while Gencaro is being developed for patients who have a genotype that identifies a drug target associated with heightened efficacy. 1 rNAPc2 (AB201) for treatment of COVID-19 Recombinant Nematode Anticoagulant Protein c2, or rNAPc2 (AB201), is a protein therapeutic in clinical development as a potential treatment for patients with COVID-19. Based on its unique mechanism of action, development history and the clinical evidence from the SARS-CoV-2 pandemic, we believe rNAPc2 has potential to be a beneficial therapy for patients with this serious viral disease. We initiated a Phase 2 clinical trial of rNAPc2 as a potential treatment for patients hospitalized with COVID-19 in the fourth quarter of 2020 and are currently enrolling patients. Certain patients with severe COVID-19 disease exhibit thrombotic complications and other inflammatory responses suggesting potential dysregulation of the coagulation and immune systems. rNAPc2 is a potent inhibitor of tissue factor, a cellular receptor responsible for initiation of the primary coagulation pathway and appears to be the major activator of the coagulation cascade during viral infection. Tissue factor is also implicated in the immune system inflammatory response to viral infections and in the process of viral dissemination during infection. We believe that evidence from the pandemic implicates tissue factor pathways as an important part of the COVID-19 disease process, and provides a rationale to test rNAPc2 as a potential therapeutic for COVID‑19 for its anticoagulant and potential anti-inflammatory properties. rNAPc2 was originally developed for potential use as an anticoagulant due to its inhibition of the TF-initiated coagulation process. It was evaluated for the prevention of thrombosis in Phase 1 and Phase 2 clinical studies involving over 800 subjects and demonstrated both safety and efficacy in these studies. rNAPc2 has also been investigated as a potential therapeutic for severe viral infections other than COVID-19. Research has shown that viral infections can provoke dysregulated activation of the TF pathway, resulting in abnormal systemic coagulation and related inflammation, leading to potential organ failure and mortality. For this reason, rNAPc2 was tested as a therapeutic in non-human primates, or NHPs, in studies against lethal doses of the Ebola and Marburg viruses, where it showed evidence of efficacy in the form of mortality reduction, decreases in inflammatory biomarkers and, evidence of reduced disseminated intravascular coagulation, or DIC. DIC is a serious condition that causes abnormal blood clotting throughout the body's blood vessels. SARS-CoV-2 is a new coronavirus identified in late 2019 that belongs to a family of enveloped RNA viruses that include Middle East Respiratory Syndrome, or MERS, and Severe Acute Respiratory Syndrome (SARS-CoV-1), both of which caused serious human infections of the respiratory system. The disease caused by the SARS-CoV-2 virus has been designated COVID-19. Since this outbreak was first reported in late 2019, there have been over 119 million confirmed cases of COVID-19 and over 2.6 million deaths worldwide attributed to the virus (as of March 2021). COVID-19 is associated with a high incidence of both arterial and venous coagulation-related adverse events in large and small blood vessels. These include, stroke, myocardial infarction, or MI, (i.e., heart attack) and pulmonary emboli; as well as, blockage of the smaller peripheral blood vessels in the fingers/toes (COVID-digit). This syndrome is so frequently observed in COVID-19 that it has received the name of COVID-19 Associated Coagulopathy, or CAC. The underlying pathology of CAC is believed to result from thrombo-inflammatory processes triggered by the viral infection. A commonly used biomarker for assessing the presence of abnormal coagulation is a D-dimer test, which is elevated (greater than 0.5) in nearly 70% of hospitalized COVID-19 patients and is associated with adverse clinical outcomes. Some researchers believe that this and other evidence points to dysregulation of TF pathways in COVID-19 patients that result in the development of thrombotic complications. rNAPc2 has shown potential in addressing the coagulation disorder caused by severe viral infections. In preliminary, non-human studies in NHPs against lethal doses of the Ebola and Marburg virus, rNAPc2 lowered D-dimer levels, reduced mortality and exhibited anti-inflammatory effects. We believe more recent research supports our belief that rNAPc2 has the ability to inhibit the activity of TF in multiple processes that contribute to severe viral disease. Taken together, we believe this evidence suggests that rNAPc2 may have therapeutic benefits for patients with serious COVID-19 infections and the accompanying high risk of thrombosis. To our knowledge, rNAPc2 is the only NME anticoagulant, and the only tissue factor inhibitor, currently under evaluation for COVID-19. As a therapeutic aimed at a host response to a disease syndrome, we believe rNAPc2 potentially could be used in combination with other antiviral drugs. We believe its potential efficacy is not linked to a specific viral genome and may not be diminished by genetic drift or the development of new strains of the SARS-CoV-2 virus. As a therapeutic addressing a disease, we believe rNAPc2 may have broad spectrum potential against multiple pathogens that have disease elements in common with COVID‑19, such as other coronaviruses and other RNA viruses. Therefore, we believe that rNAPc2 has therapeutic potential for future viral outbreaks beyond the current pandemic. rNAPc2 is a single-chain, 85 amino acid, recombinant protein administered subcutaneously, that has previously been evaluated under three FDA Investigational New Drug, or IND, applications in six Phase 1 and three Phase 2 clinical studies in the United States and Europe. These clinical trials primarily examined the safety, dosing and anticoagulation effects of rNAPc2 in patients with acute coronary syndromes, in patients undergoing knee replacement surgery and in patients undergoing percutaneous coronary interventions. In these trials, involving more than 800 human patients with over 700 exposed to drug, rNAPc2 was generally well-tolerated with a safety profile comparable to commercially available anticoagulants. rNAPc2 is manufactured in an engineered yeast strain by an established methodology following current Good Manufacturing Practices, or cGMP, and we believe this process can be readily scaled to commercial quantities. FDA granted rNAPc2 Orphan Drug Designation status in 2014 for the treatment of viral hemorrhagic fever post-exposure to Ebola virus, but human clinical trials were not conducted. 2 In October 2020, FDA approved the IND application for rNAPc2 as a potential treatment for patients hospitalized with COVID-19 and it received a Fast-Track designation in November 2020 . We initiat ed the Phase 2b clinical trial of rNAPc2 ( AB201 ) , ASPEN-COVID-19, in patients hospitalized with COVID-19 in the fourth quarter of 2020 . We anticipate announcing topline data from th is approximately 100 patient Phase 2b clinical trial in the thir d quarter of 2021 . We are evaluating rNAPc2 as a treatment for patients hospitalized with COVID-19 who are at high risk for thrombotic complications, as indicated by elevated D-dimer levels. The Phase 2b clinical trial is designed to be a randomized comparison of two-dose regimens of rNAPc2 versus heparin prescribed per local standard of care. The primary endpoint of the clinical trial is the change in D-dimer level from baseline to Day 8. If Phase 2b results indicate a favorable effect on D-dimer levels and safety is confirmed, following FDA review of the data and identification of the proposed Phase 3 rNAPc2 dose, we anticipate that clinical investigative sites will begin enrolling patients in a planned Phase 3 clinical trial. The primary endpoint of Phase 3 is planned to be clinical recovery as measured by the Adaptive COVID-19 Treatment Trial ordinal scale, with secondary endpoints that include D-dimer levels and the number of thrombotic events. We believe the Phase 3 clinical trial will be event driven, with an estimated requirement of 450 patients. We believe that favorable results from this Phase 2b/3 clinical trial program could support use of rNAPc2 in COVID-19 patients, given its potential efficacy both as an anticoagulant and an anti-viral agent that we believe counters the dysregulatory immune response and improves clinical recovery. The clinical trial is being managed in collaboration with the Colorado Prevention Center, or CPC, the University of Colorado's Academic Research Organization with extensive experience in managing vascular and anticoagulation clinical trials. We have financed the development of rNAPc2 through public equity sales. Our rNAPc2 development plans, including the timeline, depend on our ability to enroll patients during the COVID-19 pandemic, the results of our Phase 2b clinical trial, FDA guidance, and availability of drug product, all of which are currently uncertain. We own the clinical development program of rNAPc2, including Phase 2 clinical trials. If rNAPc2 is successfully developed, we believe it will have intellectual property protection, including 12 years of market exclusivity as an innovative biologic product under FDA law in the United States, 10 years data protection exclusivity in the European Union, or EU, and potentially patent protection in addition to this. We plan to pursue strategic co-development and partnering opportunities for rNAPc2 development and commercialization. Gencaro™ (bucindolol hydrochloride) for Atrial Fibrillation Gencaro™ (bucindolol hydrochloride) is a pharmacogenetically-targeted beta-adrenergic receptor antagonist with mild vasodilator properties that we are developing for the treatment of atrial fibrillation in patients with heart failure. We believe the pharmacology of Gencaro is unique and its efficacy can be enhanced by prescribing it to patients with a common genotypic variant that is present in approximately 50% of the North American and European general populations. This gene can be detected with a simple genetic test. We are developing Gencaro to treat atrial fibrillation, or AF, in patients with chronic heart failure, or HF. AF is the most common form of cardiac arrhythmia, a disruption of the heart’s normal rhythm or rate. HF is a chronic condition in which the heart is unable to pump enough blood to meet the body’s needs. AF and HF commonly occur together. In HF patients, the development of AF leads to worsening symptoms, and increased risk of hospitalization and death. Current treatment options for AF in HF patients are limited, and can be invasive, costly and dangerous. Our development plan for Gencaro focuses on the treatment of AF in patients with higher ejection fraction HF, those who have an ejection fraction, or EF, of 40% and higher who also have the genotype we believe is optimal for Gencaro efficacy. This population of HF encompasses more than half of all HF patients in the United States and Europe. There are currently few approved or effective drug therapies to treat AF or HF in this patient population. Our development plan for Gencaro is based on our recent analysis of the Phase 2b clinical trial of Gencaro for the prevention of AF in HF patients, known as GENETIC-AF. This analysis showed novel results for Gencaro in patients in the clinical trial with EF’s of 40% and higher. We are planning a new design for a Phase 3 pivotal clinical trial of Gencaro based on this analysis that addresses what we believe are important clinical assessments, including the total amount of time that a patient experiences AF, known as AF burden, maintenance of normal sinus rhythm, rhythm control interventions such as electrical cardioversion, catheter ablation and use of anti-arrhythmic drugs and drug-related complications such as bradycardia. Based on these analyses, we were issued a United States patent in February 2021 for the use of Gencaro in this patient population. We believe this patent will substantially extend the patent protection for our planned development of Gencaro into 2039. We are seeking similar patent protection in other countries. We currently have an agreement with the FDA, known as a Special Protocol Assessment, or SPA, for the requirements of a Gencaro Phase 3 clinical trial, PRECISION-AF, that would support approval of Gencaro if successful. Based on our recent analyses of the GENETIC-AF data, we may alter the design of PRECISION-AF to focus on endpoints that are not covered in the SPA agreement. We believe that patients with HF and AF represent a major unmet medical need, and this need is most pronounced in patients with EF values of 40% and above. This EF range constitutes more than half of all chronic HF in the United States and Europe, as well as in Japan and China, and there are currently few approved, effective or guideline-recommended therapies for these patients to treat either their AF or HF. AF is a very common complication in these patients, with estimates of AF incidence ranging from 40% to 60%. Beta- 3 blockers approved for HF are commonly used off-label to control heart rate in these patients, but they are not considered effective in preventing AF and none are approved for patients with EF ≥ 40%. Other anti-arrhythmic drugs approved for the treatment of AF have adverse side effects and in HF patients are either contraindicated or have label warnings for use due to an increased risk of mortality. Interventional procedures for AF, such as catheter ablation and electrical cardioversion, are invasive, expensive, and often temporary; these interventions also typically requir e the continued use of beta blockers and other anti-arrhythmic drugs post-intervention. We believe that Gencaro, if approved, may be a safe and more effective therapy for the treatment of higher ejection fraction HF patients with AF. We believe there are several potentially important attributes that would differentiate Gencaro from existing therapies, including: • More effective rhythm control compared to the current standard of care; • Reduction in the need for catheter ablation, electrical cardioversion, or toxic anti-arrhythmic drugs; • Maintenance of rhythm control after a successful AF catheter ablation; • Effective rate control with lower risk of treatment-limiting bradycardia; • Reduction in symptoms and improvement in quality of life; • Reduced health care burden; • Foundational beta-blocker benefits for HF and unique evidence of efficacy in HF patients with AF; • One of the only drug therapies approved and shown effective for AF in HF patients with EF ≥ 40%, and the only one in its drug class. We have an international patent portfolio for Gencaro in the United States, the EU, and other major markets, as well as new chemical entity status, including a new patent that we believe will give us a strong intellectual property position to at least approximately 2039 in the United States; we have filed applications similar to this new patent in international territories. We have developed a laboratory platform for the diagnostic test that would be used to prescribe Gencaro; this platform was approved by FDA for use in the Phase 2B clinical trial. We retain all rights to this test platform; we expect to use it in future clinical trials, and we believe it could be one of multiple diagnostic platforms used for commercialization. To support the continued development of rNAPc2 and Gencaro, we will need additional financing to fully fund the planned clinical trials, and our general and administrative costs through the clinical trials’ projected completion and potential commercialization. Considering the substantial time and costs associated with the development of rNAPc2 and Gencaro and the risk that we may be unable to raise a significant amount of capital on acceptable terms, we are also pursuing co-development and commercialization partnering opportunities with large pharmaceutical and/or specialty pharmaceutical companies and may pursue a strategic combination or other strategic transactions. If we are unable to obtain sufficient financing or are unable to complete a strategic transaction, we may discontinue our development activities on rNAPc2 or Gencaro or discontinue our operations . We believe our cash and cash equivalents as of December 31, 2020 , together with the $23.3 million of net proceeds raised through February 2021 from sales of our common stock, will be sufficient to fund our operations through the end of fiscal year 2022, including the projected costs for the rNAPc2 ( AB201) Phase 2b clinical trial. Conducting a Phase 3 rNAPc2 clinical trial or the Phase 3 PRECISION-AF trial would likely require additional financing. However, changing circumstances may cause us to consume capital significantly faster or slower than currently anticipated. We have based these estimates on assumptions that may prove to be wrong, and we could exhaust our available financial resources sooner than we currently anticipate; therefore, we may have to raise additional capital for other clinical trials of rNAPc2 . Initiating any Phase 3 clinical trial of Gencaro is dependent on sustained improvement in the COVID-19 pandemic and will require additional financing . In 2017, we entered into a sales agreement with a placement agent to sell, from time to time, our common stock having an aggregate offering price of up to $10.2 million, in an “at the market offering.” In 2020, we further amended the sales agreement to increase the maximum aggregate value of shares which we may issue and sell from time to time under this sales agreement to $32.4 million. This sales agreement terminated in July 2020. Under this sales agreement, we had sold an aggregate of 3,302,159 shares of our common stock pursuant to the terms of such sales agreement, as amended, for aggregate gross proceeds of approximately $32.3 million. Net proceeds received in this offering were approximately $30.8 million, after deducting expenses for executing the “at the market offering” and commissions paid to the placement agent. In July 2020, we entered into a new sales agreement with a placement agent to sell, from time to time, our common stock having an aggregate offering price of up to $54.0 million, in an “at the market offering.” As of February 2021, we had sold an aggregate of 9,928,272 shares of our common stock pursuant to the terms of such sales agreement for aggregate gross proceeds of approximately $54.0 million. Net proceeds received in this offering were approximately $52.2 million, after deducting expenses for executing the “at the market offering” and commissions paid to the placement agent. We have sold all shares available under the current prospectus. 4 I n March 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of Coronavirus, a global pandemic. This outbreak is causing major disruptions to businesses and markets worldwide as the virus spreads. We do not expect a material financial effect as a result of the pandemic. However, i f the pandemic continues to be a severe worldwide crisis, it could have a material adverse effect on our business, results of operations, financial condition and cash flows . Our Strategy Our mission is to become a leading biopharmaceutical company developing precision targeted cardiovascular therapies to enhance therapeutic response, improve patient outcomes, and reduce healthcare costs. To achieve this goal, we are pursuing the following strategies: • Advance the development of rNAPc2 . We are developing rNAPc2 as a potential therapy for patients with COVID-19, and are currently conducting the first clinical trial of the compound in hospitalized COVID-19 patients at high risk for thrombotic complications. If the results from this Phase 2b clinical trial are positive, we plan to use the results to increase the value of this program through further clinical development for COVID-19, seeking strategic collaborations with commercial or government partners and potential expansion into clinical trials for other disease indications. • Advance the development of Gencaro for the treatment of AF in HF patients. We are planning a Phase 3 clinical trial for Gencaro as a therapy for AF in HF patients, focusing on patients with EF ≥ 40%, a patient population for whom few approved or effective drug therapies currently exist. • Build a cardiovascular pipeline. Our management and employees, including our chief executive officer, are experienced in cardiovascular research, molecular genetics and clinical development of cardiovascular therapies. We are seeking to leverage this expertise to identify, acquire and develop other cardiovascular products or candidates, particularly those with potential for targeted development based on genetic or other biomarkers. The above strategies are dependent upon our ability to obtain additional funding through the sale of public or private equity or debt securities, the completion of a strategic transaction, or a combination thereof. If we are unable to secure additional funding or complete a strategic transaction, we may not be able to continue development of rNAPc2 or Gencaro, or to continue operations. COVID-19 Disease and Current Medical Need SARS-CoV-2 is a new coronavirus belonging to a family of enveloped RNA viruses that include Middle East Respiratory Syndrome (MERS) and Severe Acute Respiratory Syndrome (SARS-CoV-1). The disease caused by the SARS-CoV-2 virus has been designated COVID-19. Like the other viruses in its family, it is capable of causing serious human infections of the respiratory system. Since it was first identified in 2019, the SARS-CoV-2 virus has caused a pandemic of unprecedented scope in modern times; well over 100 million cases of COVID-19 have been confirmed and over 2.6 million deaths worldwide are attributed to the virus. There is a broad spectrum of illness caused by SARS-CoV-2 infection; COVID-19 patients range from asymptomatic to critically-ill with acute respiratory distress syndrome requiring intensive care and mechanical ventilation. All ages are at risk of disease, but the probability of serious complications from COVID-19 is higher in older patients, those in nursing homes and long-term care facilities, and in those with chronic medical conditions. COVID-19 is a deadly disease in a significant fraction of patients; in one analysis of United States confirmed COVID-19 cases, 14% were hospitalized and 5% died. Although the long-term effects of COVID-19 are unknown, there are reports of patients with persistent symptoms or organ dysfunction, including those not within high-risk groups, and there is concern that many recovered patients may suffer long term disabilities. COVID-19 is associated with a high incidence of thrombotic complications from arterial and venous coagulation-related adverse events in large and small blood vessels. These include, stroke, heart attack, and pulmonary emboli, as well as blockage of the smaller peripheral blood vessels. Some researchers believe that microthrombosis may in fact be a critical component in COVID-19-related organ dysfunction, disease progression and mortality. The observed thrombotic syndrome in COVID-19 patients has received the name of COVID-19 Associated Coagulopathy, or CAC. We believe the underlying pathology of CAC results from thrombo-inflammatory processes triggered by the viral infection. While the early course of disease is thought to be driven by replication of the SARS-CoV-2 virus, later in the disease course an exaggerated immune-inflammatory response, including coagulopathy, may take over, leading to tissue damage. A commonly used biomarker for assessing the presence of abnormal coagulation is a D-dimer test, which is elevated (greater than 0.5) in nearly 70% of hospitalized COVID-19 patients and is associated with adverse clinical outcomes. The current therapies available for COVID-19 do not adequately address the serious disease and enormous health care burden that is caused by the disease. Patients with severe disease often require prolonged hospitalization and lengthy admission in intensive care units and available therapies have not substantially altered this disease course. Currently, the only therapeutic approved for COVID‑19 in the United States is remdesivir but its efficacy in preventing disease progression and in severe patients is uncertain and it is not recommended by certain authorities such as the World Health Organization. Other antiviral therapeutics, such as monoclonal antibodies, have received emergency authorization from the Food and Drug Administration, or FDA; these agents are believed to have 5 efficacy against virus in the earlier stages of the disease, but are thought to be less effective in more severe patients requiring hospitalization. Because of the thrombotic complications caused by COVID-19, anticoagulation has become standard of care adjunctive therapy for patients that are hospitalized. Treatment protocols vary by hospital and region, but guidelines published by a large number of professional societies and the NIH recommend the use of prophylactic anticoagulation for COVID-19 patients that are hospitalized. Heparin, including low molecular weight heparin and unfractionated heparin, is the preferred agent over oral anticoagulants for hospitalized and severely ill patients. Interim data from three international studies suggest that therapeutic dosing of heparin in hospitalized patients not yet requiring Intensive Care Unit admission may reduce the need for organ support, such as mechanical ventilation, compared to prophylactic dosing. However, there is a lack of evidence that heparin protects COVID-19 patients from thrombotic events or does not increase the risk of bleeding. Thrombotic complications are still common despite the current widespread use of heparin as adjunctive therapy for hospitalized COVID-19 patients. There is uncertainty whether heparin used prophylactically prevents progression of disease. As an anti-coagulant, heparin is not targeted specifically at the disease processes caused by the SARS-CoV-2 virus, and no evidence has emerged that it has any anti-viral or anti-inflammatory activity beyond its anticoagulation properties. As an infused therapy, the use of heparin requires consistent contact between medical professionals and the patient, which creates additional safety concerns with a highly infectious pathogen like SARS-CoV-2. Despite the lack of evidence and uncertainty regarding the benefits of the current anticoagulants such as heparin, we are not aware of any novel anticoagulants currently in clinical studies for COVID-19 other than rNAPc2. In light of the importance of thrombosis in the disease course of COVID-19 and the uncertain benefits of the current anticoagulants in widespread use, we believe there is an unmet need for novel agents that have an equivalent or better safety profile than existing anti-coagulants, that are targeted to the disease processes in COVID-19 and that can provide superior benefits for seriously ill patients. We believe there is a need for novel agents that have anti-viral and anti-inflammatory activity in addition to anticoagulant properties. More generally, we believe there is a medical need for new COVID-19 therapeutics that can benefit seriously ill patients, that can prevent or slow progression of disease, reduce the severity of symptoms, shorten the disease course and improve prognosis. There is a clear need for therapies that can reduce the health care burden by reducing hospital stay, the use of the intensive care units and the use of invasive treatments such a mechanical ventilation. Four vaccines for COVID-19 have received approval or emergency authorization and have increasingly widespread acceptance. However, we believe the experience with the pandemic shows that the high medical need for effective viral therapeutics will extend beyond the current phase of the pandemic. Our belief is supported by the unprecedented health care and economic impact of the pandemic thus far, the uneven and incomplete rollout of vaccines and the fact that significant populations may never be vaccinated, the continued likelihood of surges of COVID-19 including from new strains of SARS-CoV-2 with uncertain susceptibility to the current vaccines, and the potential appearance of new corona viruses or other pathogens. These factors have greatly magnified the need for more effective therapeutics, including novel anticoagulants, with properties targeted to the disease processes caused by serious viral infections. rNAPc2 (AB201) To our knowledge, rNAPc2 is the only novel anticoagulant and the only inhibitor of tissue factor in clinical development for COVID‑19. Tissue factor is a cellular receptor responsible for initiation of the primary coagulation pathway and appears to be the major activator of the coagulation cascade during viral infection. Tissue factor is also implicated in the immune system inflammatory response to viral infections and in the process of viral dissemination during infection. We believe that evidence from the pandemic implicates tissue factor pathways as an important part of the COVID-19 disease process. Because of its potent inhibition of tissue factor, rNAPc2 was originally developed for potential use as an anticoagulant. It was evaluated for the prevention of thrombosis in Phase 1 and Phase 2 clinical studies involving over 800 subjects and demonstrated both safety and efficacy in these studies. rNAPc2 has also been investigated as a potential therapeutic for severe viral infections other than COVID-19, where it showed evidence of efficacy in the form of mortality reduction, decreases in inflammatory biomarkers and evidence of anti-thrombosis efficacy in studies against lethal doses of the Ebola and Marburg viruses, In preliminary non-human studies in NHPs against lethal doses of the Ebola and Marburg virus, rNAPc2 lowered D-dimer levels, reduced mortality and exhibited anti-inflammatory effects. We believe more recent research suggests that rNAPc2 has the ability to inhibit the activity of TF in multiple processes that contribute to severe viral disease. rNAPc2 potentially could be used in combination with other antiviral drugs. Its potential efficacy is not linked to a specific viral genome and may not be diminished by genetic drift or the development of new strains of the SARS-CoV-2 virus. As a therapeutic addressing a disease, we believe rNAPc2 may have broad spectrum potential against multiple pathogens that have disease elements in common with COVID‑19, such as other coronaviruses and other RNA viruses. Therefore, we believe that rNAPc2 has therapeutic potential for future viral outbreaks beyond the current pandemic. 6 rNAPc2 is a single-chain, 85 amino acid, recombinant protein administered subcutaneous ly , that has previously been evaluated under three FDA Investigational New Drug, or IND, applications in six Phase 1 and three Phase 2 clinical studie s in the United States and Europe. Th e s e clinical trials primarily examined the safety, dosing and anticoagulation effects of rNAPc2 in patients with acute coronary syndromes, in patients undergoing knee replacement surgery and in patients undergoing percutaneous coronary interventions. In these trials, involving more than 8 00 human patient s with over 7 00 exposed to drug, rNAPc2 was generally well-tolerated with a safety profile comparable to commercially available anticoagulants . rNAPc2 is manufactured in an engineered yeast strain by an established methodology following current Good Manufacturing Practices, or cGMP, and we believe this process can be readily scaled to commercial quantities. The ASPEN Phase 2b Clinical Trial The ASPEN Phase 2b clinical trial is a randomized, multi-center, international clinical trial evaluating two dose regimens of rNAPc2 versus heparin prescribed per local standard of care intended to enroll approximately 100 hospitalized SARS-CoV-2 positive patients that also have elevated D-dimer levels. The primary endpoint of the trial is safety and change in D-dimer level from baseline to Day 8 relative to standard of care heparin. D-dimer is a biomarker commonly used for assessing coagulation activation, which is elevated (greater than 0.5) in approximately 70% of hospitalized COVID-19 patients and is directly associated with adverse clinical outcomes. Atrial Fibrillation in Heart Failure Market Background and Opportunity Heart failure is a chronic condition in which the heart is unable to pump enough blood to meet the body’s needs. HF has numerous serious consequences, including severe impacts on quality of life, increased hospitalizations, loss of economic productivity, and premature death. HF is a leading cause of death in the developed world, and despite the availability of multiple effective drug classes, mortality due to HF is increasing. According to the 2020 American Heart Association, or AHA, Heart Disease and Stroke Statistics, there were an estimated 6.2 million Americans aged 20 years or more with HF in 2016, projected to increase to between 8.3 million and 10.7 million by 2030. One of the fundamental classifications of heart failure is based on the percentage of blood in the left ventricle of the heart that is ejected with each heartbeat, known as ejection fraction or EF. The spectrum of HF includes HF in which EF is 50% or more and is considered preserved ejection fraction, known as HFpEF; HF in which the EF is less than 40%, considered reduced ejection fraction, or HFrEF; and HF in which the EF is at least 40%, but less than 50%, sometimes referred to as mid-range ejection fraction, known as HFmrEF. Together, HFmrEF and HFpEF, that is HF with EF ≥ 40%, comprise more than half of all chronic HF in the United States and Europe. In 2012, the economic cost of HF in the United States was estimated to be nearly $31 billion, of which two-thirds, or over $20 billion, was attributable to direct medical costs. Atrial fibrillation, the most common sustained cardiac arrhythmia, is a serious disorder in which the normally regular and coordinated contraction pattern of the heart’s two small upper chambers, or the atria, becomes irregular, rapid and uncoordinated. AF can have significant quality of life impacts and potentially serious medical consequences, including increasing the risk of stroke and other cardiovascular problems. In individuals with HF, AF contributes to the disease processes that lead to the progression of HF and worsening of clinical outcomes. AF is considered an epidemic cardiovascular disease and a major public health burden, similar to HF. The estimated number of individuals with AF globally in 2015 was 33.3 million. According to AHA Heart Disease and Stroke Statistics Reports from 2017-2020, the prevalence of AF in the United States was estimated to be 5.2 million people in 2015. In the European Union, the prevalence of AF was estimated to be 8.8 million (age 55 and over) in 2010. It is estimated that AF costs the U.S. economy about $6.0 billion annually. AF and HF share many of the same risk factors and commonly occur together. It has been estimated that 30-60% of HF patients will also develop AF, with this incidence increasing in HF patients with higher EF; we estimate that 40-60% of HF patients with EF ≥ 40% will also be diagnosed with AF. Medical Need and Current Therapy The goals of current medical therapy for AF are to provide anticoagulation to reduce the risk of stroke, and also either maintain sinus rhythm (known as rhythm control), or reduce the high heart rate caused by AF (known as rate control), in both cases to minimize patient symptoms and reduce the risk of further complications and disease progression. Unfortunately, the current treatment options for treating AF in patients with HF have significant limitations. Beta-blockers are considered standard of care for the treatment of HF patients, including in patients with co-morbid AF. They are also viewed as foundational therapy to treat AF in HF patients for their ability to provide rate control. Their safety in this patient population is well established. However, current beta blockers approved for HF patients are only modestly effective at providing rhythm control, and none are FDA approved for this indication. Importantly, none of these drugs have been shown to be effective for treating HF in patients with 7 EF ≥ 40%, so they are currently used off-label in this setting. When used for rate control, these drugs can cause bradycardia, a condition in which the heart rate drops below a safe threshold, which often leads to dose reductions and potential loss of the drug’s treatment effect. Furthermore, recent evidence indicates that the mortality and other clinical benefits of these beta blockers are uncertain when sustained or permanent AF is present. Anti-arrhythmic drugs are a drug class that is often prescribed to provide rhythm control. These drugs are frequently used in patients with both HF and AF when a rate control strategy using a beta blocker fails to control the patient’s symptoms. However, these agents have significant safety issues, For example, in the United States, anti-arrhythmic drug therapy for AF used in addition to beta-blockers is generally confined to the drugs amiodarone and dofetilide, which have multiple safety and toxicity concerns. Because of these concerns, physicians treating HF patients seek to limit the use of these anti-arrhythmic drugs. Non-pharmacologic interventions such as catheter ablation and electrical cardioversion (ECV), are also used to treat AF in patients with HF. Catheter ablation is now guideline-recommended in this patient population and its use is increasing. However, it is not a replacement for drug therapy; it is invasive, expensive and generally impermanent. Drug therapy, including beta blockers, is generally continued in patients post-ablation, both for rhythm control and for HF benefit. ECV is expensive and less permanent than ablation, but like ablation, post-ECV patients will generally remain on drug therapy to treat their AF and HF, including beta-blockers. In light of the serious medical consequences presented by AF in the presence of HF as well as, the limitations of current therapies, we believe there is an unmet need for a drug therapy that can provide greater rhythm control compared to the current standard of care; can reduce the need for toxic anti-arrhythmic drugs, catheter ablation, and electrical cardioversion; can provide effective rate control with a lower risk of treatment-limiting bradycardia; and can provide foundational beta-blocker benefits for HF. This need is particularly significant for HF patients with EF ≥ 40%, for whom there are few approved or Class I guideline-recommended drug therapies. Gencaro Clinical Development The GENETIC-AF Phase 2B Clinical Trial GENETIC-AF enrolled 267 patients from the United States, Canada and Europe. The primary analysis compared the evidence of safety and efficacy of Gencaro versus an active comparator, TOPROL-XL. The primary endpoint of the trial was time to first event of AF/AFL or ACM during a 24-week follow-up period after the establishment of sinus rhythm. Randomized patients had a EF ≤ 55%, a history of AF in the past 6 months, and the beta-1 389 arginine homozygous genotype that we believe responds best to Gencaro. Laboratory Corporation of America, or LabCorp, developed the genetic test, obtained an Investigational Device Exemption, or IDE, from the FDA and provided the companion diagnostic test and services to support our GENETIC‑AF clinical trial. For the primary endpoint of time to AF recurrence, Gencaro demonstrated a similar treatment benefit in the overall population (p = 0.961) compared to the active comparator, TOPROL-XL. However, based on further analysis of the trial, we believe we have identified a population that shows greater response to Gencaro compared to TOPROL-XL across multiple important clinical assessments, including the primary endpoint of time to AF recurrence, maintenance of normal sinus rhythm, cumulative AF burden, and AF-related clinical interventions and complications. We plan to study this population in our Phase 3 clinical trial. These further analyses of the GENETIC-AF population (shown in the table below) demonstrated that Gencaro, as compared to metoprolol, reduced AF burden, improved maintenance of sinus rhythm and lowered the need for additional rhythm control interventions. 8 Endpoint Entire GENETIC-AF Cohort Time to 1 st AF/AFL/ACM (Primary Endpoint) 1.01 (neutral) (0.71, 1.42) p = 0.961 N = 267 Cumulative 24-week AF Burden (substudy) 0.64 ( ↓ 36%) (0.46, 0.86) p = 0.002 N = 67 AF Burden at Week 24 0.45 ( ↓ 55%) (0.39, 0.50) p < 0.001 N = 67 ECGs in Normal Sinus Rhythm 1.39 ( ↑ 39%) (1.22, 1.58) p < 0.001 N = 257 AF Interventions (ECVs, Ablations, & Class 3 AA Drugs) 0.68 ( ↓ 32%) (0.50, 0.91) p = 0.011 N = 257 Bradycardia prevalence (Buc. vs. met., VR< 60 bpm) 0.39 ( ↓ 61%) (0.31, 0.49) P < 0.001 N = 256 Dose reductions (pts. w/bradycardia vs. non-b.) 4.25 ( ↑ 4X) (2.06, 9.60) P < 0.001 N = 257 Time to first AF/AFL/ACM treatment effect = hazard ratio (95% CI). AF burden = % time in AF per day. Cumulative AF burden treatment effect = AUC ratio (i.e., AUC BUC /AUC MET ) over 24-week follow-up period with significance assessed via null permutation. AFB at Week 24 = Instantaneous estimates of average daily AF burden at week 24 with comparison between groups expressed as the ratio of the estimates and tested for significance using a Wald test. Normal Sinus Rhythm = total # ECGs in sinus rhythm with ventricular rate ≥ 60 and ≤ 100 bpm during efficacy follow-up period. AF Interventions = ECV, ablation, or guideline-recommended antiarrhythmic use during efficacy follow-up period. Treatment effect for normal sinus rhythm, AF interventions and bradycardia = prevalence rate ratio (i.e., PRR BUC /PRR MET ) modeled to test significance using Poisson regression. Treatment with Gencaro was associated with a 36% reduction in cumulative AF burden over 24 weeks of follow-up compared to metoprolol, leading to a 55% reduction in AF burden at the end of 24 weeks. Consistent with the results in the device substudy, there was a 39% increase in the prevalence of ECGs demonstrating normal sinus rhythm in the overall study population. Treatment with Gencaro also led to a 32% lower utilization of adjunctive rhythm control therapies, including electrical cardioversion, catheter ablation and antiarrhythmic drug therapy. There was also a 61% reduction in bradycardia with Gencaro versus metoprolol. The consequence of bradycardia is a reduction in beta-blocker dose, which 4.2-fold higher in patients exhibiting bradycardia than without bradycardia. The BEST Phase 3 Heart Failure Trial The effect of Gencaro on heart failure endpoints in an advanced HFrEF population was evaluated in the 2,708 patient, placebo controlled Phase 3 BEST clinical trial co-sponsored by the NHLBI and Department of Veterans Affairs. In addition to the parent population, BEST included a 1,040 patient DNA substudy that evaluated the effects of adrenergic receptor, or AR, polymorphisms on Gencaro effectiveness. The BEST trial was terminated early because, after positive mortality results from two HF trials involving other beta-blockers had been reported, a substantial number of BEST trial investigators concluded that it was unethical to continue to give placebo to BEST trial participants. Our reanalysis of the BEST results in accordance with the FDA approved, pre-specified statistical analysis plans (which had not been performed by the sponsors of BEST) demonstrated a 13% risk reduction on the primary endpoint of ACM in the BEST trial with a p-value of 0.053. The risk reduction on HF clinical efficacy endpoints such as mortality and hospitalization ranged from 34% to 48% in this beta-1 389 arginine homozygous genotype. The DNA substudy revealed that Gencaro exhibited greater efficacy in patients homozygous for the beta-1 389 arginine homozygous genotype ( ADRB1 Arg389Arg), encoding for receptors that exhibit higher function and greater affinity for norepinephrine compared to the patients who did not have the beta-1 389 arginine homozygous genotype (i.e., beta-1 389 Gly carriers). In the 47% of BEST trial patients with a ADRB1 Arg389Arg genotype Gencaro reduced (p <0.05) the primary endpoint of mortality or heart transplantation by 43%, all-cause mortality, cardiovascular mortality, heart failure hospitalizations, heart failure progression, development of atrial fibrillation, and incidence of ventricular tachycardia or ventricular fibrillation with degrees of reduction (effect sizes) ranging from 34% (heart failure progression) to 74% (atrial fibrillation). Beta-1 389 Gly carriers had no statistically significant reduction in any endpoint. 9 Pharmacology and Pharmacogenetics of Gencaro Gencaro (bucindolol hydrochloride) is a nonselective (blocks both beta-1 and beta-2 adrenergic receptors) beta- receptor blocking agent with mild vasodilator properties. This combination of properties initially placed Gencaro in the "3rd Generation" category of beta-blockers that is based on the strategy of their development. When its pharmacogenetic properties were elucidated and its development became pharmacogenetically based, we subsequently considered Gencaro a fourth-generation beta-blocker. The dominant beta-receptor on human heart cells is the beta-1, with smaller number of beta-2 receptors present. Importantly, beta-2 receptors are also present on adrenergic nerve terminals in the heart, where they regulate the release of the neurotransmitter norepinephrine, or NE. The blocking of these receptors prevents them from binding with other molecules, primarily NE, which activates these receptors to release more NE. We believe Gencaro has two unique anti-adrenergic properties not possessed by other beta-blockers currently approved for the treatment of HF: (1) it is moderately sympatholytic, i.e., by blocking beta-2 receptors on adrenergic nerves it lowers adrenergic drive to a level that can be detected on measurements of central or systemic venous NE levels, and, (2) through “inverse agonism,” as it binds to a polymorphic "389 arginine" form of heart cell beta-1 receptor in isolated human heart preparations it promotes the inactivation of the active-state of this receptor. These properties, as described below, were observed to interact with receptor polymorphisms in such a way that we believe targeting a specific genotype of the beta-1 receptor gene (known as ADRB1) could improve the therapeutic response of patients. We believe Gencaro’s efficacy is enhanced in patients with the beta-1 389 arginine homozygous genotype ( ADRB1 Arg389Arg), which has been shown to be present in approximately 50% of the North American and European general populations. To date no other beta-blocker has been shown to possess pharmacological sympatholysis, or beta-1 AR inverse agonism in human heart preparations. We believe that Gencaro's sympatholytic and beta-1 AR inverse agonist properties contribute to its enhanced lowering of HF and arrhythmia event rates in patients who have an ADRB1 Arg389Arg genotype. Gencaro Clinical and Regulatory Strategy We intend to advance Phase 3 clinical development of Gencaro as a therapy for HF patients with AF, focusing on HF with EF ≥ 40%. The regulatory strategy for Gencaro is to obtain an initial approval to treat AF in a HF population with EF ≥ 40% and ≤ 55% and the beta-1 389 arginine homozygous genotype; the population demonstrating the greatest efficacy in the Phase 2B GENETIC-AF clinical trial. Indication expansion for Gencaro will focus on genotype-positive HF patients with EF >55%, which we believe would substantially expand the addressable patient population, if successful. We have obtained an SPA agreement with the FDA to conduct a single, 400-patient Phase 3 clinical trial that, if successful at a statistical threshold of p ≤ 0.01, may be sufficient to support an NDA for the marketing approval of Gencaro. The clinical trial design is similar to GENETIC-AF, including the active comparator, TOPROL-XL, and the primary endpoint of time to AF or atrial flutter, or AF/AFL, recurrence or mortality during a 6-month follow-up period. The planned clinical trial will use a standard significance criterion of p ≤ 0.05 for the primary endpoint; however, if the primary endpoint is significant with a p‑value ≤ 0.01, then this single Phase 3 clinical trial may be sufficient for regulatory approval per the SPA agreement. The NDA submission for Gencaro is eligible for expedited review in the United States under the Fast Track development program. that was granted to Gencaro in 2015. Based on the use of this same endpoint in GENETIC-AF it is anticipated that ≥90% of the primary events will be due to recurrent AF/AFL. Secondary objectives will examine other important endpoints, such as AF burden and AF treatment-related interventions. The planned clinical trial will use a standard significance criterion of p ≤ 0.05 for the primary endpoint; however, if the primary endpoint is significant with a p‑value ≤ 0.01, then this single Phase 3 clinical trial may be sufficient for regulatory approval per the SPA agreement. The Gencaro Test If approved, we believe that Gencaro will be the first cardiovascular drug to be integrated with a companion diagnostic. This would be a test for the patient genotype approved for the drug, and could be performed by a variety of laboratory processes or platforms. In collaboration with LabCorp, we developed one such genetic test, obtained an IDE from the FDA and used this test in our GENETIC-AF clinical trial. We retain all rights to this particular test platform, and we believe it could be used for commercialization. Future clinical trials of Gencaro, including PRECISION‑AF, are expected to use a similar diagnostic test to identify the patient’s receptor genotype. We believe the Gencaro Test could be developed and commercialized through one or more diagnostic providers, by the company marketing Gencaro, or a combination of approaches. We also believe that point of care genetic tests, which could be performed during the patient’s visit to the physician, will be part of the commercialization strategy for Gencaro. 10 Development Pipeline Our lead product candidates are rNAPc2 (AB201) as a potential treatment for patients hospitalized with COVID-19, and Gencaro™ (bucindolol hydrochloride) for the treatment of atrial fibrillation in patients with chronic heart failure. With the COVID-19 pandemic of 2020, rNAPc2 was identified as a potential treatment for diseases caused by viruses, initially focusing on patients hospitalized with COVID-19, the disease syndrome caused by the SARS-CoV-2 virus. Because of the severity of the COVID-19 pandemic and the impact on our Gencaro program, w e transitioned our development work and capital allocation to designing a Phase 2b and potential Phase 3 clinical trial program for rNAPc2 . We are currently enrolling patients in the Phase 2b portion of the program and, with positive results from that trial, expect it to be sequentially followed by Phase 3 using a common protocol for both trials. Our lead cardiovascular product candidate, Gencaro, is a potential treatment for HF patients with AF. Gencaro (bucindolol hydrochloride) is a pharmacogenetic-targeted beta-adrenergic receptor antagonist with mild vasodilator properties that is considered a fourth-generation beta-blocker based on its novel pharmacogenetic profile. We believe the treatment of AF in HF patients with EF ≥ 40% is an unmet medical need with a near term and straightforward regulatory pathway. Our plan is to obtain an initial approval for Gencaro to treat AF in a genotype specific HF population; HF patients with EF ≥ 40% and the genotype we studied in the Phase 2B GENETIC-AF clinical trial. We believe that, if approved, there are additional indication expansion opportunities for Gencaro in other AF populations. We continue to evaluate the feasibility and potential timing for initiating PRECISION-AF relative to the COVID-19 pandemic. We may seek additional capital or a strategic partnership for the Phase 3 clinical trial and potential commercialization of Gencaro. AB171 is a thiol-containing derivative of isosorbide mononitrate. Pre-clinical data indicate that AB171 may have antioxidant properties and may be favorably differentiated from other nitrates for prevention of myocardial remodeling, anti-atherosclerotic effects and the loss of effectiveness when used as a sustained therapy. We believe the unique pharmacology of AB171, coupled with targeting to genetically identified enhanced response subpopulations that we have identified, has the potential to translate to better long-term responses than currently available treatments in indications such as HF and PAD. We also have exclusive pharmacogenetic and other patent rights to drug targets and candidates that have potential indications in cardiovascular disease, oncology and other therapeutic areas. We may seek partners to assist us in the development of these candidates or who may license them. We may also seek funds to advance the development of the compounds on our own. Financial Resources To support the continued development of rNAPc2 and Gencaro, we will need additional financing to fully fund the planned clinical trials, and our general and administrative costs through the clinical trials’ projected completion and potential commercialization. Considering the substantial time and costs associated with the development of rNAPc2 and Gencaro and the risk that we may be unable to raise a significant amount of capital on acceptable terms, we are also pursuing co-development and commercialization partnering opportunities with large pharmaceutical and/or specialty pharmaceutical companies and may pursue a strategic combination or other strategic transactions. If we are delayed in obtaining financing or are unable to complete a strategic transaction, we may discontinue our development activities on rNAPc2 or Gencaro or discontinue our operations . We believe our cash and cash equivalents as of December 31, 2020 , together with the $23.3 million of net proceeds raised through February 2021 from sales of our common stock, will be sufficient to fund our operations through the end of fiscal year 2022. Conducting a Phase 3 rNAPc2 clinical trial or the Phase 3 PRECISION-AF trial would likely require additional financing. However, changing circumstances may cause us to consume capital significantly faster or slower than currently anticipated. We have based these estimates on assumptions that may prove to be wrong, and we could exhaust our available financial resources sooner than we currently anticipate; therefore, we may have to raise additional capital for other clinical trials of rNAPc2 . Initiating any Phase 3 clinical trial of Gencaro is dependent on sustained improvement in the COVID-19 pandemic to the point of being able to recruit patients for a cardiovascular clinical trial and will require additional financing . In 2017, we entered into a sales agreement with a placement agent to sell, from time to time, our common stock having an aggregate offering price of up to $10.2 million, in an “at the market offering.” In 2020, we further amended the sales agreement to increase the maximum aggregate value of shares which we may issue and sell from time to time under this sales agreement to $32.4 million. This sales agreement terminated in July 2020. Under this sales agreement, we sold an aggregate of 3,302,159 shares of our common stock pursuant to the terms of such sales agreement, as amended, for aggregate gross proceeds of approximately $32.3 million. Net proceeds received in this offering were approximately $30.8 million, after deducting expenses for executing the “at the market offering” and commissions paid to the placement agent. 11 In July 20 20 , we entered into a new sales agreement with a placement agent to sell, from time to time, our common stock having an aggregate offering price of up to $ 54.0 million, in an “at the market offering . ” As of February 2021 , we ha d sold an aggregate of 9,928,272 shares of our common stock pursuant to the terms of such sales agreement for aggregate gross proceeds of approximately $ 54.0 million. Net proceeds received in this offering were approximately $52.2 million, after deducting expenses for executing the “at the market offering” and commissions paid to the placement agent. We have sold all shares available under the current prospectus . Research and Development Expenses Our research and development expenses were $5.0 million for the year ended December 31, 2020 as compared to $1.8 million for 2019, an increase of approximately $3.2 million. R&D expense in 2021 is expected to be higher than 2020, as we conduct the rNAPc2 (AB201) Phase 2b clinical trial. Licensing and Royalty Obligations rNAPc2 We own the clinical development program of rNAPc2, including Phase 2 clinical trials. Gencaro Our patent portfolios relating to Gencaro, including a patent that issued in 2021, are either owned by us or are subject to licenses that impose no royalty obligations or milestone payments relating to the further development, approval and commercialization of Gencaro. We are also a party to licenses for patents relating to Gencaro that are now expired. We believe that there are no future milestone or royalty obligations that will be payable under these licenses. Competition rNAPc2 rNAPc2 is the only novel compound that we believe is in clinical development for the treatment of COVID-19. Other trials for this condition are evaluating various doses/regimens of approved anti-thrombotic agents, predominantly heparins. Though heparin therapy is considered standard therapy for all hospitalized patients, and is believed to provide some benefit based on interim clinical trial data, the degree of this benefit is uncertain and many patients receiving heparin therapy develop serious COVID-19 disease and thrombotic complications. Moreover, three major clinical trials exploring heparin therapy in these patients have stopped enrolling intensive care unit COVID patients due to lack of efficacy. These trials, which are comparing prophylactic versus therapeutic dose heparins, are continuing in less severe patients. The pathology of thrombosis in COVID-19 may explain the limitations of heparin treatment. This pathology is believed to be an inflammatory thrombosis with immune endothelialitis. Thus, we believe rNAPc2 may better address COVID-19-associated thrombosis than heparin. Gencaro Current HF treatments include three beta-blockers approved for HF in the Unites States. However, their efficacy in providing control of the arrhythmia caused by AF, or rhythm control, is only mild. It is also now acknowledged that evidence is lacking that the approved beta-blockers provide outcome benefits for patients who develop permanent AF. Furthermore, these drugs have not demonstrated efficacy for HF patients with EF ≥ 40%, which is the focus of the Gencaro development program. Current AF treatments include pharmaceutical, procedural or device intervention. There are several antiarrhythmic drugs approved by the FDA for the treatment and/or prevention of recurrent AF. However, these drugs have safety and/or administration concerns and all but one have contraindications or label warnings regarding their prescription in patients with HF. Drugs that are currently approved or used for the treatment or prevention of AF in HF either have not demonstrated efficacy in these patients, or have notable risks due to adverse side effects or lack sufficient efficacy. Therefore, in HF, and specifically in HF patients with EF ≥ 40%, we believe there is a substantial unmet medical need for AF therapies that are more effective and have fewer side effects than those currently available. We believe that Gencaro’s treatment of AF in HF patients could provide a more effective and safer pharmacotherapy than treatments currently used in these patients. The pharmaceutical industry is highly competitive. We face significant competition from pharmaceutical companies and biotechnology companies that are researching and selling products designed to treat cardiovascular conditions. Most of these companies have significantly greater financial, product development, manufacturing, and commercial resources than we have. 12 If approved, some of the drugs which Gencaro would potentially compete with are generic in the United States and are used, though not approved or shown to be effective, for the treatment of AF or in HF patients with EF ≥ 40% . Gencaro c ould be priced at a premium compared to some of these therapies. In addition, Gencaro, if approved, would be prescribed in conjunction with a diagnostic test, add ing additional procedures to the process of prescribing Gencaro, which could make it more difficult for us to compete against existing or future therapies . Manufacturing and Product Supply rNAPc2 (AB201) is a single-chain, 85 amino acid recombinant protein that is manufactured using an engineered yeast strain. Multiple manufacturers of both drug substance and drug product have successfully produced rNAPc2 over its clinical development history. We outsource all manufacturing and analytical testing, and have selected third party contract manufacturing organizations, or CMOs, on the basis of their technical and regulatory expertise. We are actively working with these CMOs to produce additional drug substance and drug product to support potential Phase 3 development. rNAPc2 drug product is currently produced as an injectable formulation, and is stored frozen at -20°C in sterile glass vials. The product is administered subcutaneously. Gencaro is a small molecule drug with an established manufacturing history. Multiple manufacturers of both the active pharmaceutical ingredients, or API, and drug product have successfully produced Gencaro for use in clinical trials over the course of its clinical development. We outsource all manufacturing and analytical testing of the Gencaro API and drug product. We have selected third party contract manufacturing organizations on the basis of their technical and regulatory expertise. Our approach with our contract manufacturing partners has been to replicate the manufacturing processes that were used to support the prior pivotal clinical trial with Gencaro, and to minimize any changes from these baseline processes, thereby reducing technical and regulatory risk. For API production, we contracted with Groupe Novasep which completed the drug substance registration batches successfully. The resulting drug substance was used to manufacture the drug product used in the clinical trial material for the Phase 2B clinical trial and is expected to be used in the proposed Phase 3 clinical trial. For drug product production, we have contracted with Patheon, Inc. to manufacture the Gencaro tablets. Gencaro is produced in a tablet form, utilizing standard solid oral dosage processing techniques. Six separate dosage strengths have been manufactured, with the maximum recommended dose of 100mg twice daily. Registration batches were successfully completed by Patheon, Inc. and tablets from these runs were placed in cGMP storage to supply clinical trials. In addition, we contracted with a separate service provider for packaging and distribution of our clinical trial materials. Government Regulation Governmental authorities in the United States at the federal, state, and local levels and foreign countries extensively regulate, among other things, the research, development, testing, manufacture, labeling, promotion, advertising, marketing, distribution, sampling, and import and export of pharmaceutical and medical device products. In the United States, the FDA regulates these activities at the federal level pursuant to the Federal Food Drug and Cosmetic Act, or the FDCA, and the regulations promulgated thereunder. In Canada, Health Canada regulates these activities. In Europe, the Competent Authorities and Ethics Committees of the respective countries regulate these activities. In South America, the Health Authorities and Ethics Committees of their respective countries regulate these activities. We anticipate that all of our product candidates will require regulatory approval by governmental agencies prior to commercialization. The process of obtaining approval and the subsequent process of maintaining compliance with appropriate federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. In addition, these statutes, rules, regulations and policies may change and our products may be subject to new legislation or regulations. Both before and after approval or clearance, failure to comply with the requirements of the FDA and other state and federal statutes can lead to significant penalties or could disrupt our ability to manufacture and sell these products. In addition, the FDA could refuse to provide certificates needed to export our products if the agency determines that we are not in compliance. Premarket Approval of Drugs FDA approval is required for marketing of any new drug, dosage form, indication, or strength. The steps required before new human therapeutic drug products are marketed in the United States and foreign countries include rigorous preclinical and clinical testing and other approval requirements by regulatory agencies, such as the FDA and comparable agencies in foreign countries. There is no guarantee that products will be approved in a specific timeframe or at all. Preclinical Phase . Preclinical studies are generally conducted in the laboratory to identify potential drug candidates and to evaluate their potential efficacy and safety. These studies include laboratory evaluation of product chemistry, formulation and stability, as well as studies to evaluate short and long-term toxicity in animals. Preclinical studies are governed by numerous regulations, including but not limited to FDA’s Good Laboratory Practices. Clinical Phase . Before human clinical trials can commence, an Investigational New Drug, or IND, application, submitted to FDA must become effective. For an IND to become effective, the applicant must submit, among other things, information on design of the proposed investigation, reports necessary to assess the safety of the drug for use in clinical investigation, and information on the 13 chemistry and manufacturing of the drug, controls available for the drug, and primary data tabulations from animal or human studies. The clinical phase of development involves the performance of human studies, including adequate and well-controlled human clinical trials to establish the safety and efficacy of the product candidate for each proposed indication. Typically, clinical evaluation involves three sequential phases, which may overlap. During Phase 1, clinical trials are conducted with a relatively small number of subjects or patients to determine the early safety profile of a product candidate, as well as dose tolerance, absorption, and the pattern of drug distribution and drug metabolism. Phase 2 trials are conducted with groups of patients afflicted by a specific target disease to determine preliminary efficacy, optimal dosages and dosage tolerance and to identify possible adverse effects and safety risks. In Phase 3, larger-scale, multi- center trials are conducted with patients afflicted with a specific target disease over a longer term to confirm Phase 2 results and provide reliable and conclusive data supporting efficacy and safety of a drug as required by regulatory agencies for drug approval. The conduct of clinical trials is subject to extensive regulation. FDA may delay or suspend clinical trials through clinical holds. NDA Submission. In the United States, the results of preclinical and clinical testing along with chemistry, manufacturing and controls information, are submitted to the FDA in the form of an NDA. Under the current Prescription Drug User Fee Act, or PDUFA, after submission of an NDA and payment, or waiver, of the required fee, the FDA’s goal is to review most standard NDAs within 10 months from the time that a sponsor’s application is accepted as filed by the FDA, which can occur within a 60-day window following the initial submission of the application. At the end of the 10 months, the FDA’s goal is to issue a “complete response,” or approve the NDA. While FDA’s goal is to issue a complete response within 10 months, the process may take longer than 10 months, particularly if multiple review cycles are required. Gencaro has been granted Fast Track Designation which allows for a rolling review of a marketing application. A rolling review allows FDA to consider reviewing portions of an NDA before the sponsor submits the complete application. In responding to an NDA, the FDA may grant marketing approval or deny the application if the FDA determines that the application does not satisfy the statutory and regulatory approval criteria. A denial may include a request for additional information, including additional clinical data and/or an additional Phase 3 clinical trial. Data from clinical trials are not always conclusive and FDA may interpret data differently than we interpret data. Under the Food and Drug Modernization Act of 1997, the FDA is authorized to approve a drug based on a single adequate and well-controlled study if such study and other confirmatory data are sufficient to establish the drug’s effectiveness. However, it has long been the FDA’s general position that the standard of proof of a drug’s effectiveness generally requires at least two well-controlled and adequate Phase 3 clinical studies demonstrating statistically significant results as compared to a placebo or active control (with p-values of less than 0.05) with respect to the primary endpoint or endpoints of the trial. In addition, in accordance with current FDA law and regulations, the FDA may refer a drug to an advisory committee for review prior to approval. Most new compounds are referred to an FDA advisory committee, which could add additional time to the review process. There is no guarantee that the advisory committee will recommend approval of a drug candidate. In some cases, FDA may require completion, within a specified time period, of additional clinical studies after approval, referred to as Phase 4 clinical studies, to monitor the effect of a new product and may prevent or limit future marketing of the product based on the results of these post-marketing programs. Furthermore, prior to granting approval, the FDA generally conducts an inspection of the facilities, including outsourced facilities that will be involved in the manufacture, production, packaging, testing and control of the drug substance and finished drug product for compliance with current Good Manufacturing Practice, or cGMP, requirements. If the FDA approves the NDA, the sponsor is authorized to begin commercialization of the drug in accordance with the approval. Even if the FDA approves the NDA, the FDA may decide later to suspend or withdraw product approval if compliance with regulatory standards is not maintained or if safety problems are recognized after the product reaches the market. In addition, the FDA requires surveillance programs to monitor approved products that have been commercialized, and the agency has the power to require additional clinical studies, to require changes in labeling or to prevent further marketing of a product based on the results of these post-marketing programs. The FDA also has authority to request implementation of a risk evaluation and mitigation strategy, or REMS, that could restrict distribution of Gencaro or require us to provide additional risk information to prescribers. Whether or not FDA approval has been obtained, approval of a product candidate by comparable foreign regulatory authorities is necessary prior to the commencement of marketing of a product candidate in those countries. The approval procedures vary among countries and can involve additional testing. The time required to obtain approval may differ from that required for FDA approval. Post-approval Compliance. If regulatory approval for a drug or medical device is obtained, the product and the facilities manufacturing the product are subject to periodic inspection and continued regulation by regulatory authorities, including compliance with cGMP, as well as labeling, advertising, promotion, recordkeeping, and reporting requirements, including the reporting of adverse events. In addition, the FDA closely regulates the post-approval marketing and promotion of drugs, including standards and regulations for labeling, promotion to health care professionals, direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the Internet. Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved labeling. Companies are responsible for compliance with such requirements and would be responsible to ensure that all contract manufacturing organizations who perform work for them also comply with such requirements. Similarly, if a drug manufacturer hires contract sales representatives or consultants to promote its products, such organizations or individuals must 14 comply with all of the same requirements applicable to the drug manufacturer. The FDA regularly inspects companies to determine compliance with cGMPs and other post-market requirements. Failure to comply with statutory requirements and the FDA’s regulations can result in a variety of administrative or enforcement actions, including but not limited to an FDA Form 483 (which is issued by the FDA at the conclusions of an inspection when an investigator has observed any conditions that may constitute violations), a public warning letter, suspension or withdrawal of regulatory approvals, product recalls, product detentions, refusal to provide export certificates, seizure of products and criminal prosecution. Drug Price Competition and Patent Term Restoration Act of 1984. Under the Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, Congress created an abbreviated FDA review process for generic versions of pioneer (brand name) drug products. The Hatch-Waxman Act also provides for patent term restoration and the award, in certain circumstances, of non-patent marketing exclusivities. Generic Drug Approval . The Hatch-Waxman Act established an abbreviated FDA review process for drugs that are shown to be equivalent to approved pioneer drugs. Approval for a generic drug is obtained by filing an abbreviated NDA, or ANDA. Generic drug applications are “abbreviated” because they generally do not include clinical data to demonstrate safety and effectiveness. Instead, an ANDA applicant must establish that its product is bioequivalent to an approved drug and that it is the same as the approved drug with respect to active ingredient(s), route of administration, dosage form, strength and recommended conditions of use (labeling). The FDA will approve the generic as suitable for an ANDA if it finds that the generic does not raise questions of safety and effectiveness as compared to the pioneer drug. A drug is not eligible for ANDA approval if the FDA determines that it is not equivalent to the pioneer drug or if it is intended for a different use. Any applicant who files an ANDA seeking approval of a generic version of an approved drug listed in FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, or the Orange Book, must certify to the FDA that (i) no patent information on the drug has been listed in the Orange Book; (ii) that each patent listed in the Orange Book for that approved drug has expired; (iii) FDA should approve the product on the date on which a listed patent expires; or (iv) that such patent is invalid, unenforceable or will not be infringed by the manufacture, use or sale of the generic drug. If the ANDA applicant makes a certification pursuant to (iv) above, or a Paragraph IV certification, and the NDA holder files an infringement suit against the ANDA applicant within 45 days of receiving the Paragraph IV notification, the NDA owner is entitled to an automatic 30-month stay of FDA’s ability to approve the ANDA. This 30-month stay will end early upon any decision by a court that the patent is invalid, unenforceable or not infringed by the generic drug. Patent Term Extension . While the term of a U.S. patent is generally 20 years from the earliest priority date of a patent application (excluding a provisional patent application), a U.S. patent that covers subject matter requiring regulatory approval to market is eligible for an extension of that patent term. The Hatch-Waxman Act provides for the restoration of a portion of the patent term lost during product development and FDA review of an application. Patent Term Extension, or PTE, extends the term of an issued patent for generally (i) the length of the FDA approval process, i.e., the complete period of NDA review, and (ii) half of the time spent in clinical trials, i.e., the IND period. However, the maximum period of restoration cannot exceed five years, or restore the total remaining term of the patent to greater than 14 years from the date of FDA approval of the product. Under 35 U.S.C. § 156(a), a patent covering a method of using a product is eligible for PTE if the following conditions are met: 1) the patent has not yet expired; 2) the patent was not previously extended; 3) the patent owner submits an application for PTE that includes all necessary supporting information within 60 days of FDA approval; 4) the product was subject to regulatory review before its commercial marketing or use; and 5) the drug application is for the first permitted commercial marketing of the product. We believe that, if Gencaro is approved by the FDA, one of several of our U.S. patents may be eligible for PTE, which could provide approximately 5 years of additional patent life for that patent based on our current clinical trial plans. A Supplementary Protection Certificate, or SPC, is a form of patent term extension that is available for pharmaceutical products approved for marketing in the European Union, or EU. We obtained a patent in Europe on methods for using Gencaro that is similar to one of our US Patents and this EU patent is in force in certain countries in Europe, including the United Kingdom, France, Germany, Italy and Spain. We believe that this patent may be eligible for an SPC, if Gencaro is approved for marketing in any European country in which the patent is in force, which could provide up to five years of additional patent life. We believe that our patents in other jurisdictions may also be eligible for similar term extensions. Non-Patent Marketing Exclusivities. Separate and apart from patent protection, the Hatch-Waxman Act entitles approved drugs to various periods of non-patent statutory protection, known as marketing exclusivity. The Hatch-Waxman Act provides five years of “new chemical entity” marketing exclusivity to the first applicant to gain approval of an NDA for a product that contains an active 15 moiety not found in any other approved product. This exclusivity means that another manufacturer cannot submit an ANDA or 505(b)(2) NDA until the marketing exclusivity period ends. This exclusivity protects the entire new chemical entity franchise, including all products containing the active ingredient for any use and in any strength or dosage form, but will not prevent the submission or approval of stand-alone NDAs where the applicants have conducted their own clinical studies to demonstrate safety and effectiveness. There is an exception, however, for a competitor that seeks to challenge a patent with a Paragraph IV certification. Four years into the five-year exclusivity period, a manufacturer who alleges that one or more of the patents listed with the NDA is invalid, unenforceable or not infringed may submit an ANDA or 505(b)(2) NDA for a generic or modified version of the product. The Hatch-Waxman Act also provides three years of “new use” marketing exclusivity for the approval of NDAs, and supplements, where those applications contain the results of new clinical investigations (other than bioavailability studies) essential to the FDA’s approval of the applications. Such applications may be submitted for new indications, dosage forms, strengths, or new conditions of use of approved products. So long as the studies are essential to the FDA’s approval or were conducted by or for the applicant, this three-year exclusivity prohibits the final approval of ANDAs or 505(b)(2) NDAs for products with the specific changes associated with those studies. It does not prohibit the FDA from approving ANDAs or 505(b)(2) NDAs for other products containing the same active ingredient, without those changes. Similar non-patent market exclusivity is provided for in the EU and other international jurisdictions. We believe that, if approved in the EU, Gencaro may be eligible for ten years of market exclusivity in the EU, measured from the date of approval there. FDA Premarket Review of Medical Devices Unless an exemption applies, each medical device that a company wishes to market in the United States requires either approval of a premarket approval application, or PMA, or clearance of a premarket notification, commonly known as a “510(k)” from the FDA. The FDA classifies medical devices into one of three classes. Devices deemed to pose lower risks are placed in either class I or II, which may require the manufacturer to submit to the FDA a 510(k) requesting permission to commercially distribute the device. Clearance of a 510(k) usually requires between three months and one year from the time of submission of the 510(k), although the process may take longer. The FDA’s 510(k) clearance procedure is less rigorous than the PMA approval procedure, but is available only to companies who can establish that their device is substantially equivalent to a legally-marketed “predicate” device that was (i) on the market prior to the enactment of the Medical Device Amendments of 1976, (ii) reclassified from Class III to Class II, or (iii) has been cleared through the 510(k) procedure. 510(k)s must typically be supported by performance data, including preclinical data, bench testing, and in some cases, clinical data. Some low risk devices are exempted from this requirement. Devices deemed by the FDA to pose the greatest risks, or for which there is no predicate, are placed in class III, and require a PMA. PMA Pathway . Generally, a PMA must be supported by extensive data and valid scientific evidence, including, but not limited to, technical, preclinical, clinical trials, manufacturing and labeling to demonstrate to the FDA’s satisfaction a reasonable assurance of the safety and effectiveness of the device for its intended use. After a PMA is sufficiently complete, the FDA will accept the application and begin an in-depth review of the submitted information and will generally conduct a pre-approval inspection of the manufacturing facility or facilities to ensure compliance with FDA’s Quality System Regulations, or QSR. By statute, the FDA has 180 days to review the “accepted application”, although, generally, review of the application can take between one and three years, and it may take significantly longer. The PMA application process can be expensive, and there is a substantial “user fee” that must be paid to FDA in connection with the submission of a PMA application. If the FDA’s evaluation of the PMA application or the manufacturing facility is not favorable, the FDA may deny approval of the PMA application or issue a “not approvable” letter. The FDA may also require additional clinical trials, which can delay the PMA approval process by several years. In addition, if FDA discovers that an applicant has submitted false or misleading information, FDA may refuse to review submissions until certain requirements are met pursuant to its Application Integrity Policy, or AIP. If the FDA approves the PMA, it may place restrictions on the device. After the PMA is approved, if significant changes are made to a device, its manufacturing or labeling, a PMA supplement containing additional information must be filed for prior FDA approval. PMA supplements often must be approved by the FDA before the modification to the device, the labeling, or the manufacturing process may be implemented. Delays in receipt of or failure to receive such clearances or approvals, the loss of previously received clearances or approvals, or the failure to comply with existing or future regulatory requirements could have a material adverse effect on our business, financial condition and results of operations. Clinical Trials. Clinical trials are generally required to support a PMA application and are sometimes required for 510(k) clearance. These trials generally require an Investigational Device Exemption, or IDE, application approved in advance by the FDA for a specified number of patients, unless the proposed study is deemed a non-significant risk study, which is eligible for an exemption from the IDE requirements. The IDE application must be supported by appropriate data, such as animal and laboratory testing results. Clinical trials may begin if the IDE application is approved by the FDA and the appropriate institutional review boards, or IRBs, at the clinical trial sites. Submission of an IDE application does not give assurance that the FDA will issue the IDE. If the IDE application is approved, there can be no assurance the FDA will determine that the data derived from the trials support the safety and effectiveness of the device or warrant the continuation of clinical trials. An IDE supplement must be submitted to and approved by the FDA before a sponsor or investigator may make a change to the investigational plan in such a way that may affect its scientific soundness, study indication or the rights, safety or welfare of human subjects. The trial must also comply with the FDA’s regulations, including the 16 requirement that informed consent be obtained from each subject. Even if a trial is completed, the results of clinical testing may not adequately demonstrate the safety and efficacy of the device or may otherwise not be sufficient to obtain FDA clearance to market the product in the United States. In Vitro Diagnostic Companion Diagnostic Devices. FDA has described IVD companion diagnostic devices as in vitro diagnostic devices that provide information that is essential for the safe and effective use of a corresponding therapeutic product. The use of an IVD companion diagnostic device with a particular therapeutic product is stipulated in the instructions for use in the labeling of both the diagnostic device and the corresponding therapeutic product, as well as in the labeling of any generic equivalents of the therapeutic product. An IVD companion diagnostic device could be used to (i) identify patients who are most likely to benefit from a particular therapeutic product; (ii) identify patients likely to be at increased risk for serious adverse reactions as a result of treatment with a particular therapeutic product; or (iii) monitor response to treatment for the purpose of adjusting treatment (e.g., schedule, dose, discontinuation) to achieve improved safety or effectiveness. Although FDA’s regulation of IVD companion diagnostic devices is evolving and implemented on a case-by-case basis, FDA’s stated policy for a novel therapeutic product is that an IVD companion diagnostic device should be developed and approved or cleared contemporaneously to support the therapeutic product’s safe and effective use. The clinical performance and clinical significance of the IVD companion diagnostic device is to be established using data from the clinical development program of the corresponding therapeutic product. FDA recognizes, however, that there may be cases where contemporaneous development may not be possible. With respect to the Gencaro Test, there is no assurance that we will be able to develop and obtain approval or clearance contemporaneously with Gencaro. Failure to develop the Gencaro Test or obtain clearance or approval could delay approval of Gencaro, if FDA regards the Gencaro Test as an IVD companion diagnostic test that is essential to the safe and effective use of Gencaro. Continuing Regulation. After a device is placed on the market, numerous regulatory requirements apply to the manufacturer, or holder of a PMA approval. Unless subject to an exemption, medical devices distributed in the United States must be manufactured in compliance with the FDA’s Quality System Regulations, or QSRs, and current good manufacturing practices. These regulations govern the manufacturing process, including design, manufacture, testing, release, packaging, distribution, documentation and purchasing, as well as complaint handling, corrective and preventative actions and internal auditing. In complying with the QSRs, manufacturers must expend significant time, money and effort. Companies are also subject to other post-market and general requirements, including but not limited to product listing and establishment registration, post-market surveillance requirements, limitations on promotion, and requirements for recordkeeping and reporting of certain adverse events, malfunctions, corrections and removals. As discussed above, FDA regularly inspects companies to assess compliance with the QSRs and other post-market requirements. Failure to comply with these requirements can result in, among other things, adverse publicity, warning letters, and potential civil and criminal penalties. As part of such arrangement, we will seek to have the diagnostic company take responsibility for compliance with the FDA’s device approval and on-going regulatory requirements. International Marketing Approvals. International sales of medical devices are subject to foreign government regulations, which vary substantially from country to country and are subject to change. The time required to obtain approval by a foreign country may be longer or shorter than that required for FDA clearance or approval, and the requirements may differ. Other Regulatory Requirements. We are also subject to various federal, state and local laws, regulations and recommendations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with our work. The extent and character of governmental regulation that might result from future legislation or administrative action cannot be accurately predicted. Medical Device Tax In March 2010, the U.S. Congress adopted and President Obama signed into law comprehensive health care reform legislation. Among other initiatives, these laws impose significant new taxes on medical device makers in the form of a 2.3% excise tax on U.S. medical device sales, with certain exemptions, beginning on January 1, 2013. On January 22, 2018, legislation was enacted suspending the medical device tax in 2018 and 2019. In December 2019, a permanent repeal of the medical device tax was enacted. The Gencaro Test is likely to be subject to this tax if this tax is reinstated in the future. Intellectual Property The future success of our business will partly depend on our ability to maintain market exclusivity for our product candidates, if approved, in the United States and important international markets, and for other products or product candidates that we may acquire or develop. We will rely on statutory protection, patent protection, trade secrets, know-how, and in-licensing of technology rights to maintain protection for our products. 17 rNAPc2 We own the clinical development program of rNAPc2, including Phase 2 clinical trials. If rNAPc2 is successfully developed, we believe it will have intellectual property protection, including 12 years of market exclusivity as an innovative biologic product under FDA law in the United States, 10 years data protection exclusivity in the EU, and potentially patent protection in addition to this. We plan to pursue strategic co-development and partnering opportunities for rNAPc2 development and commercialization. Gencaro We believe that Gencaro, if approved, will have market exclusivity in the United States and in major international markets. We recently obtained a patent in the United States for the use of Gencaro for the patient population we plan to study in the Phase 3 pivotal trial. We have filed similar patent applications in international jurisdictions. If Gencaro is approved by the FDA or international regulatory agencies based on this planned clinical development, we believe that the commercialization of Gencaro will have patent protection extending into 2039. We have an existing patent portfolio of United States and international patents covering the use of Gencaro for various cardiovascular indications in the genetic population we plan to study in Phase 3, that we believe will provide additional patent protection. In addition to patent protection, Gencaro will qualify as a new chemical entity and if approved will have data protection in the United States and other jurisdictions in which it is approved. We also have other patent rights in additional drug candidates having possible indications in cardiovascular disease, oncology, and other therapeutic areas; these are in both early and later stages of development. We may seek collaborators to assist us in the development of these candidates or we may seek to raise funds to advance the development of the compounds on our own. Information about our Executive Officers Information relating to our executive officers is included in Item 10 of Part III of this Annual Report and such information is incorporated herein by reference. Human Capital Management As of December 31, 2020, we had 14 employees, of which 11 are full-time. None of our employees are represented by any collective bargaining unit. We believe that we maintain good relations with our employees. Information relating to compensation of our executive officers is included in Items 10 and 11 of Part III of this Annual Report and such information is incorporated herein by reference. The structure of our compensation programs balances incentive earnings for both short-term and long-term performance. We are committed to providing comprehensive benefit options and offering benefits that will allow our employees and their families to live healthier and more secure lives. Some examples are employees are eligible for health insurance, prescription drug benefits, dental insurance, vision insurance, life insurance, disability insurance, health savings accounts, flexible spending accounts, paid and unpaid leaves, a retirement plan and life and disability/accident coverage. We also offer a variety of voluntary benefits that allow employees to select the options that meet their needs, including hospital indemnity insurance, accident insurance and critical illness insurance. We continually monitor employee turnover rates as our success depends upon retaining our highly trained personnel. We believe the combination of competitive compensation and career growth and development opportunities have helped increase employee tenure and reduce voluntary turnover. The average tenure of our employees is approximately nine years and approximately half of our employees have been employed by us for more than ten years . Corporate Information On January 27, 2009, we completed a business combination, or the Merger, between Nuvelo, Inc., or Nuvelo, a corporation originally incorporated in 1992, and its subsidiary, ARCA biopharma, Inc. Immediately following the Merger, we changed our name from Nuvelo, Inc. to ARCA biopharma, Inc. Our principal offices are located in Westminster, Colorado. 18 We file our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 , as amended, or the Exchange Act, electronically with the U.S. Securities and Exchange Commission, or the SEC. The public may read or copy any materials that have been filed with the SEC at the SEC’s Public Reference Rooms at 100 F Street, N.E., Washington, D.C. 20549 on official business days during the hours of 10:00 a.m. and 3:00 p.m. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov. You may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports on our website at http://www.arcabiopharma.com on the earliest practicable date following the filing with the SEC or by contacting the Investor Relations Department at our corporate office by calling (720) 940-2200. Information found on our website is not incorporated by reference into this report. 19