What changed in this filing

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Item 1A. Risk Factors

2021-03-31 compared with 2020-03-13 · 255 added, 178 removed, 962 unchanged (31% of the section changed)

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Additional risks not currently known to us or other factors not perceived by us to present significant risks to our business at this time also may impair our business operations.

Following is a summary of our Risk Factors:

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

We currently have no product revenues and no approved products and will need to raise additional capital to operate our business.

• We are highly dependent on the success of PRS-060/AZD1402, our lead candidate in our respiratory pipeline, and cinrebafusp alfa, the lead candidate in our IO pipeline.

We are executing a broad development program for each of PRS-060/AZD1402 and cinrebafusp alfa and clinical and regulatory outcomes for each of PRS-060/AZD1402 and cinrebafusp alfa, if not successful, will significantly harm our business.

• Our limited operating history as a clinical-stage company may hinder our ability to successfully meet our objectives.

• Our global operations subject us to various risks, and our failure to manage these risks could adversely affect our results of operations.

• If we fail to comply with environmental, health and safety laws and regulations that apply to us, we could become subject to fines or penalties or incur costs that could harm our business.

• Our current operations are largely concentrated in two locations and any adverse events affecting these locations may have material adverse consequences on our business.

• Our failure to comply with data protection laws and regulations could lead to government enforcement actions, private litigation and/or adverse publicity and could negatively affect our operating results and business.

• Significant disruptions of information technology systems or security breaches could adversely affect our business.

• We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.

• We could be subject to product liability lawsuits based on the use of our drug candidates in clinical testing or, if obtained, following our products' marketing approval and commercialization.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to cease clinical testing or limit commercialization of our drug candidates.

• Our business may be adversely affected by the ongoing coronavirus pandemic.

• We are heavily dependent on the successful development of our drug candidates and programs and we cannot be certain that we will receive regulatory approvals or be able to successfully commercialize our products even if we receive regulatory approvals.

• Preclinical and clinical testing of our drug candidates that has been conducted to date or will be conducted in the future may not have been or may not be performed in compliance with applicable regulatory requirements, which could lead to increased costs or material delays for their further development.

• Our research and development efforts are focused on a rapidly evolving area of science, and our approach to drug discovery and development is novel and may never lead to marketable products.

• Clinical drug development involves a lengthy and expensive process with uncertain outcomes, clinical trials are difficult to design and implement, and any of our clinical trials could produce unsuccessful results or fail at any stage in the process.

• If we experience delays or difficulties in the enrollment of research subjects in clinical trials, those clinical trials could take longer than expected to complete and our receipt of necessary regulatory approvals could be delayed or prevented.

• The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and the results of our clinical trials may not satisfy the requirements of the FDA or comparable foreign regulatory authorities.

• The review processes of regulatory authorities are lengthy, time consuming, expensive and inherently unpredictable.

If we are unable to obtain approval for our drug candidates from applicable regulatory authorities, we will not be able to market and sell those drug candidates in those countries or regions and our business could be substantially harmed.

• Our failure to obtain marketing approval in jurisdictions other than the United States and Europe would prevent our product candidates from being marketed in these other jurisdictions.

Any approval that we are granted for our product candidates in the United States or Europe would not assure approval of product candidates in the other or in any other jurisdiction.

• Our product candidates may cause undesirable side effects that could delay or prevent their marketing approval, limit their commercial potential, or result in significant negative consequences following marketing approval, if marketing approval is obtained.

• We may expend our limited resources to pursue a particular drug candidate or indication that does not produce any commercially viable products and may fail to capitalize on drug candidates or indications that may be more profitable or for which there is a greater likelihood of success.

• We rely on third parties to conduct our clinical trials and preclinical studies.

If these third parties do not successfully carry out their contractual duties, meet expected deadlines or otherwise conduct the trials as required or comply with regulatory requirements, we may not be able to obtain regulatory approval for our drug candidates, commercialize our product candidates when expected or at all, and our business could be substantially harmed.

• We rely and expect to continue to rely completely on third parties to formulate and manufacture our preclinical, clinical trial and commercial drug supplies.

The development and commercialization of any of our drug candidates could be stopped, delayed or made less profitable if those third parties fail to provide us with sufficient quantities of such drug supplies or fail to do so at acceptable quality levels, including in accordance with applicable regulatory requirements or contractual obligations, and our operations could be harmed as a result.

• Disagreements with respect to the commercial terms of our sales, licensing, purchase or manufacturing agreements may limit our commercial success.

• We depend on third parties and intend to continue to license or collaborate with third parties, and events involving these strategic partners or any future collaboration could delay or prevent us from developing or commercializing products.

• Our success depends in part on the efforts of our current and possible future collaborators, who will likely have substantial control and discretion over the continued development and commercialization of drug candidates that are the subject of our collaborations.

• We may not receive any further milestone, royalty or license payments under our current collaborations.

• Our commercial success depends upon attaining significant market acceptance of our drug candidates, if approved, among physicians, patients, third-party payors and other members of the medical community.

• Biologics carry unique risks and uncertainties, which could have a negative impact on future results of operations.

• Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.

• If we breach any of the agreements under which we license from third parties the intellectual property rights or commercialization rights to our drug candidates, particularly our license agreements with TUM, Enumeral and Kelun, we could lose license rights that are important to our business and our operations could be materially harmed.

• If our efforts to protect the proprietary nature of the intellectual property related to our technologies are not adequate, we may not be able to compete effectively and our business could be harmed.

• Claims that we infringe the intellectual property rights of others may prevent or delay our drug discovery and development efforts.

• We may desire to, or be forced to, seek additional licenses to use intellectual property owned by third parties, and such licenses may not be available on commercially reasonable terms, or at all.

• Certain technologies and patents have been developed with partners and we may face restrictions on this jointly developed intellectual property.

• If we are not able to attract and retain highly qualified personnel, we may not be able to successfully implement our business strategy.

• We have broad discretion in how we use our cash, cash equivalents and marketable securities, including the net proceeds from our collaborations, public and private securities offerings, and may not use these financial resources effectively, which could affect our results of operations and cause our stock price to decline.

• We have had and have previously reported material weaknesses in our internal controls over financial reporting.

If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and investors’ views of us.

• Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans or otherwise, could result in dilution of the percentage ownership of our stockholders and could cause our stock price to fall.

A detailed discussion of the above Risk Factors follows below.

Risks Related to Our Business, Financial Position, Capital Requirements, Managing our Growth and Other Legal Compliance Matters

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We are a clinical-stage biopharmaceutical company.

To date, we have not generated any commercial sales revenue and are not profitable and have incurred losses since our inception in 2001.

To date, we have not generated any commercial sales revenue, are not profitable, and have incurred losses since our inception in 2001.

For the years ended December 31, 2020 and 2019, we reported net loss of $37.2 million and $25.5 million, respectively.

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We are currently focused primarily on the development of our respiratory and IO programs.

Our lead respiratory drug candidate PRS-060/AZD1402, in partnership with AstraZeneca, is currently in phase 1 MAD studies.

Our IO program includes our lead IO drug candidate, PRS-343, which is currently in phase 1 escalation studies alone and in combination with atezolizumab.

We have additional IO partnered programs with Servier and Seattle Genetics.

Together these programs which will result in our continued incurrence of significant research, development and other expenses and resources.

Our partner AstraZeneca has received regulatory approval from two countries for a global phase 2a study of PRS-060/AZD1402, our lead respiratory drug candidate.

Our IO program includes our lead IO drug candidate, cinrebafusp alfa, which is currently in phase 1 studies.

We have additional IO partnered programs with Servier and Seagen.

Together these programs will result in our continued incurrence of significant research, development and other expenses and resources.

If our research and development efforts, including preclinical studies or clinical trials for any of our drug candidates fail or produce unsuccessful results and those drug candidates do not gain regulatory approval, or if any of our drug candidates, if approved, fail to achieve market acceptance, we may never become profitable.

In addition, the failure of one drug candidate or program may have an adverse impact on other drug candidates and programs that include our class of Anticalin proteins.

In addition, the failure of one drug candidate or program may have an adverse impact on other drug candidates and programs within our class of Anticalin-based therapies.

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

Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital.

We are highly dependent on the success of PRS-060/AZD1402, our lead candidate in our respiratory pipeline, and PRS-343, the lead candidate in our IO pipeline.

We are executing a broad development program for each of PRS-060/AZD1402 and PRS-343 and clinical and regulatory outcomes for each of PRS-060/AZD1402 and PRS-343, if not successful, will significantly harm our business.

Our future success is highly dependent on our ability to successfully develop, obtain regulatory approval for, and commercialize PRS-060/AZD1402 and PRS-343.

In general, most early-stage investigatory drugs, including inhaled therapeutics such as PRS-060/AZD1402 and oncology drug candidates such as PRS-343, do not become approved drugs.

Accordingly, there is a very meaningful risk that PRS-060/AZD1402 and PRS-343 will not succeed in one or more

clinical trials sufficient to support one or more regulatory approvals.

To date, clinical and preclinical outcomes from PRS-060/AZD1402 and PRS-343 have had a significant impact on our market valuation, financial position, and business prospects, and we expect this to continue in future periods.

If one or more clinical trials of PRS-060/AZD1402 or PRS-343 is not successful, it would materially harm our market valuation, prospects, financial condition and results of operations.

We are highly dependent on the success of PRS-060/AZD1402, our lead candidate in our respiratory pipeline, and cinrebafusp alfa, the lead candidate in our IO pipeline.

Our future success is highly dependent on our ability to successfully develop, obtain regulatory approval for and commercialize PRS-060/AZD1402 and cinrebafusp alfa.

In general, most early-stage investigatory drugs, including inhaled drug candidates such as PRS-060/AZD1402 and oncology drug candidates such as cinrebafusp alfa, do not become approved drugs.

Accordingly, there is a very meaningful risk that either or both of PRS-060/AZD1402 and cinrebafusp alfa will not succeed in one or more clinical trials sufficient to support one or more regulatory approvals.

To date, clinical and preclinical outcomes from PRS-060/AZD1402 and cinrebafusp alfa have had a significant impact on our market valuation, financial position and business prospects, and we expect this to continue in future periods.

If one or more clinical trials of PRS-060/AZD1402 or cinrebafusp alfa is not successful, it would materially harm our market valuation, prospects, financial condition and results of operations.

We will need substantial additional funding to continue our operations, which could result in significant dilution or restrictions on our business activities.

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Our operations have consumed substantial amounts of cash since our inception.

We expect to need substantial additional funding to pursue the preclinical and clinical development of our drug candidates, as well as to launch and commercialize any drug candidates for which we receive regulatory approval.

We expect to need substantial additional funding to continue the preclinical and clinical development of our drug candidates, as well as to launch and commercialize any drug candidates for which we receive regulatory approval.

We will require additional capital for the further development and commercialization of our drug candidates and programs, and may need to raise additional funds sooner than we currently anticipate if we choose to and are able to expand more rapidly than we currently anticipate.

Further, we expect our expenses to increase in connection with our ongoing activities, particularly as we continue to advance, expand, and monitor the performance of our preclinical and clinical programs, such as PRS-060/AZD1402, PRS-343, and PRS-344, as well as additional programs that we advance through preclinical development and into the clinic and whose performance we monitor.

Further, we expect our expenses to increase in connection with our ongoing activities, particularly as we continue to advance, expand and monitor the performance of our preclinical and clinical programs, such as PRS-060/AZD1402, cinrebafusp alfa and PRS-344, as well as additional programs that we advance through preclinical development and into the clinic and whose performance we monitor.

In addition, if we obtain regulatory approval for any of our drug candidates, we expect to incur significant commercialization expenses related to regulatory requirements, product manufacturing, marketing, sales and distribution.

Furthermore, we expect to incur additional costs associated with operating as a public company.

Furthermore, we expect to continue to incur additional costs associated with operating as a public company.

We may also encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may increase our capital needs and/or cause us to spend our cash resources faster than we expect.

To date, we have financed our operations through a mix of equity investments from private and public investors, the incurrence of debt, grant funding, and the receipt of up-front and milestone payments due under our various collaboration agreements, and we expect to continue to finance our operations through equity investments from public investors for the foreseeable future.

To date, we have financed our operations through a mix of equity investments from private and public investors, the incurrence of debt, grant funding and the receipt of up-front and milestone payments due under our various collaboration agreements, and we expect to continue to finance our operations in part through equity investments from public investors for the foreseeable future.

Additional funding from those or other sources may not be available when or in the amounts needed, on acceptable terms, or at all.

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In addition, servicing the interest and principal repayment obligations under debt facilities could divert funds that would otherwise be available to support research and development, clinical or commercialization activities.

If we obtain capital through collaborative arrangements, these arrangements could require us to relinquish rights to our Anticalin-brand technology or drug candidates and could result in receipt of only a portion of the revenues associated with the potential commercialization of our partnered drug candidates.

If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce, or eliminate our research and development for our drug candidates or any future commercialization efforts.

If we obtain capital through collaborative or licensing arrangements, these arrangements could require us to relinquish rights to our Anticalin technology or drug candidates and could result in receipt of only a portion of the revenues associated with the potential commercialization of our partnered drug candidates.

If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development activities for our drug candidates or any future commercialization efforts.

Any of these events could significantly harm our business, financial condition, and prospects.

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We were formed in 2001, and since that time our focus has been on discovery of Anticalin-brand drug candidates.

We are currently conducting clinical development of both PRS-060/AZD1402, in partnership with AstraZeneca, and PRS-343, and we are also advancing other drug candidates through preclinical development with the intention of initiating additional clinical-stage programs.

In addition to our focus on respiratory diseases and IO, we are also exploring additional indications that may be suitable for Anticalin-brand drug therapeutics.

We are currently conducting clinical development of PRS-060/AZD1402, in partnership with AstraZeneca, and cinrebafusp alfa, and we are also advancing other drug candidates through preclinical development with the intention of initiating additional clinical-stage programs.

In addition to our focus on respiratory diseases and IO, we are also exploring additional indications that may be suitable for Anticalin-based therapies.

Our drug candidates are in the early stages of development, have not obtained marketing approval, have never generated any revenue from sales and will require extensive testing before commercialization.

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• managing our cash flows and any growth we may experience in an environment where costs and expenses relating to clinical trials, regulatory approvals and commercialization continue to increase.

If we are unsuccessful in accomplishing these objectives, we may not be able to raise capital, expand our business, develop our drug candidates or continue our operations.

If we are unsuccessful in accomplishing any or all of these objectives, we may not be able to raise capital, expand our business, develop our drug candidates or continue our operations.

Our global operations subject us to various risks, and our failure to manage these risks could adversely affect our results of operations.

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• potentially adverse tax consequences and changes in tax laws;

challenges in providing solutions across a significant distance, in different languages and among different cultures;

• challenges in providing solutions across a significant distance, in different languages, different time zones and among different cultures (particularly, for as long as travel is limited due to the COVID-19 pandemic);

• different, complex and changing laws governing intellectual property rights, sometimes affording reduced protection of intellectual property rights in certain countries;

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In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations applicable to us.

These current or future laws and regulations may impair our research, development or production

efforts or impact the research activities we pursue, particularly with respect to research involving human subjects or animal testing.

These current or future laws and regulations may impair our research, development or production efforts or impact the research activities we pursue, particularly with respect to research involving human subjects or animal testing.

Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions, which could cause our financial condition to suffer.

Health and safety regulations in the United States, Germany, and Australia and in the countries where our technology and potential products are developed, licensed or sold may prevent the sale or use of our technology or products in the future.

We are subject to a variety of regulations regarding worker health and safety in the United States, European Union (Germany), Australia, and in the countries where our technology and potential products are licensed or sold.

Health and safety regulations in the United States, Germany, and Australia and in the countries where our technology and potential products are or may be developed, licensed or sold may prevent the sale or use of our technology or products in the future.

We are subject to a variety of regulations regarding worker health and safety in the United States, the European Union (Germany), Australia and in the countries where our technology and potential products are licensed or may be sold.

Because our technology and potential products may frequently involve the manufacture or use of certain chemical or biological compounds, we are required to certify their safety for industrial use and development in a variety of countries and contexts.

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Any such claims may have a negative impact on our revenues and may prove substantially disruptive to our business in the future.

In addition, under the EU regulation on classification, labeling and packaging of substances and mixtures, or CLP, and under other regulations in the United States or other countries related to the clinical development of our drug candidates (including, for example, submissions to regulatory authorities such as the FDA and EMA as well as submissions related to obtaining a non-proprietary, or INN and USAN, name for our clinical drug candidates to the World Health Organization, or the WHO, and United States Adopted Name Council, or the USAN Council), we may be required to publicly disclose the composition of our proprietary products or substances, which may facilitate infringement or avoidance of our intellectual property by third parties and may potentially reduce the margin we are able to charge for our products by allowing competitors to more accurately determine our production costs.

Future development of these regulations may have a further negative impact on our revenues and a substantial negative impact on our business.

We may be limited in our use of our net operating loss carryforwards .

As of December 31, 2020, we had net operating loss carryforwards for United States federal income tax purposes of $27.3 million and net operating loss carryforwards for state income tax purposes of $33.2 million.

Tax loss carryforwards that were generated prior to December 31, 2017 expire through 2037, U.S.

federal generated after that date do not expire.

Tax loss carryforwards that were generated prior to December 31, 2017 expire through 2037;

federal tax loss carryforwards generated after that date do not expire.

State loss carryforwards expire starting in 2035.

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Despite the implementation of security measures, our internal computer systems and those of our contractors and consultants are vulnerable to damage from computer viruses, hacking, ransomware, cyber-attacks, unauthorized access as well as telecommunication and electrical failures.

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

drug development programs and operations.

Our information technology and other internal infrastructure systems, including corporate firewalls, servers, leased lines and connection to the Internet, face the risk of systemic failure that could disrupt our operations.

Although we have invested significant resources to enhance the security of our computer systems, there can be no assurances we will not experience unauthorized intrusions into our computer systems, or those of our CROs, vendors, contractors and consultants, that we will successfully detect future unauthorized intrusions in a timely manner or that future unauthorized intrusions will not result in material adverse effects on our financial condition, reputation or business prospects.

For example, the loss of clinical trial data from completed, ongoing, or planned clinical trials could result in delays in our regulatory approval efforts and we may incur substantial costs to attempt to recover or reproduce such data.

Likewise, we currently rely, and expect to continue to rely, on third parties for the manufacture of our product candidates and any future product candidates and to conduct clinical trials, and similar events relating to their computer systems could also have a material adverse effect on our business.

Certain data security breaches must be reported to affected individuals and the government, and in some cases to the media, under provisions of HIPAA, other U.S.

federal and state law and requirements of non-U.S.

jurisdictions, and financial penalties may also apply.

If any disruption or security breach resulted in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and/or the further development of our drug candidates could be delayed.

We are also vulnerable to accidents, electrical blackouts, labor strikes, terrorist activities, war, natural disasters, adverse public health events and other events beyond our control, and we have not undertaken a systematic analysis of the potential consequences to our business as a result of any such events and do not have an applicable recovery plan in place.

For example, in December 2019, a novel strain of coronavirus was first identified in Wuhan, Hubei Province, China.

Any outbreak of contagious diseases such as coronavirus, or other adverse public health developments, could have a material and adverse effect on our business operations.

Such adverse effects could include disruptions or restrictions on the ability of our, our collaborators’, or our suppliers’ personnel to travel, and could result in temporary closures of our facilities or the facilities of our collaborators or suppliers.

Such disruptions may result in material delays in the advancement of our programs, including in the initiation or conclusion of drug substance or drug product manufacturing campaigns or in the initiation or conclusion of any clinical study.

In addition, given that it impacts the respiratory tract, the novel strain of coronavirus may negatively impact our ability to conduct clinical studies in respiratory diseases, including asthma.

Any disruption to our operations or the operations of our collaborators or suppliers would likely impact our drug development efforts, operating results, and our financial condition.

The extent to which the coronavirus may impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus.

As another example, certain of our development efforts, particularly those related to our Phase 1 study of PRS-060/AZD1402, which are being conducted in Australia, are located in geographical areas that are known to be prone to certain natural disasters and weather events, including wildfires.

In 2019 and continuing into 2020, dozens of wildfires have erupted in New South Wales, Australia, prompting the government of Australia to declare a state of emergency in November 2019.

Should such a natural disaster occur that causes disruption to our development efforts in Australia or elsewhere, thereby impeding our ability or the ability of our collaborators to timely conduct our clinical trials, our ability to conduct our business could be severely restricted, and our business and results of operations could be adversely affected as a result.

The extent to which the wildfires in Australia or any natural disaster may impact our results will depend on future developments, which are highly uncertain and cannot be predicted.

Although we carry business interruption insurance for our operations in Germany and the United States to protect us against losses or damages resulting from various disasters, we cannot assure you that our insurance coverage will be sufficient to satisfy any damages and losses.

We are also vulnerable to accidents, electrical blackouts, labor strikes, terrorist activities, war, natural disasters, adverse public health events and other events beyond our control, and we have not undertaken a systematic analysis of the potential consequences to our business as a result of all of such events and do not have an applicable recovery plan in place.

Any disruption to our operations or the operations of our collaborators or suppliers from these kinds of events would likely impact our drug development efforts, operating results and our financial condition.

With respect to potential impacts of the ongoing novel coronavirus pandemic, see “ Our business may be adversely affected by the ongoing coronavirus pandemic .”

As another example, certain of our development efforts, particularly those related to our phase 1 study of PRS-060/AZD1402, which was conducted in Australia, are located in geographical areas that are known to be prone to certain natural disasters and weather events, including wildfires.

In 2019 and 2020, dozens of wildfires erupted in New South Wales, Australia, prompting the government of Australia to declare a state of emergency.

Should such a natural disaster that causes disruption to our development efforts occur again in Australia or elsewhere, thereby impeding our ability or the ability of our collaborators to timely conduct our clinical trials, our ability to conduct our business could be severely restricted and our business and results of operations could be adversely affected as a result.

The extent to which any natural disaster may impact our results will depend on future developments, which are highly uncertain and cannot be predicted.

Although we carry insurance to protect us against some losses or damages resulting from certain types of disasters, the extent of that insurance is limited in scope and amount, and we cannot assure you that our insurance coverage will be sufficient to satisfy any damages and losses.

If our facilities are unable to operate because of an accident or incident or for any other reason, even for a short period of time, any or all of our research and development programs may be harmed.

Any business interruption may have a material adverse effect on our business, financial position, results of operations, and prospects.

Our current operations are largely concentrated in two locations and any events affecting these locations may have material adverse consequences.

Our current operations are largely concentrated in two locations, and any adverse events affecting these locations may have material adverse consequences on our business.

Our current operations are carried out primarily in our facilities located in Hallbergmoos, Germany and Boston, Massachusetts.

Any unplanned event, such as flood, fire, explosion, earthquake, extreme weather condition, medical epidemics, power shortage, telecommunication failure, or other natural or man-made accidents, or incidents that prevent us from fully utilizing our facilities in these two locations, may have a material adverse effect on our ability to operate our business, particularly on a daily basis, and have significant negative consequences on our financial and operating conditions.

Any unplanned event, such as a flood, fire, explosion, earthquake, extreme weather condition, medical epidemic or pandemic, power shortage, telecommunication failure, or other natural or man-made accident, or an incident that prevents us from fully utilizing our facilities in these two locations, may have a material adverse effect on our ability to operate our business, particularly on a daily basis, and have significant negative consequences on our financial and operating conditions.

Loss of access to these facilities may result in increased costs, delays in the development of our product candidates, or interruption of our business operations.

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The legislative and regulatory landscape for data protection continues to evolve, and in recent years there has been an increasing focus on privacy and data security issues.

In the United States, numerous federal and state laws and regulations, including state data breach notification

laws, state health information privacy laws and federal and state consumer protection laws govern the collection, use, disclosure and protection of health-related and other personal information.

In the United States, numerous federal and state laws and regulations, including state data breach notification laws, state health information privacy laws and federal and state consumer protection laws govern the collection, use, disclosure and protection of health-related and other personal information.

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

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The GDPR became fully effective in May 2018.

In addition, in 2018, California adopted a new privacy law, scheduled to go into effect on January 1, 2020, that borrows heavily from the GDPR.

In addition, in 2018, California adopted a privacy law that went into effect on January 1, 2020, and that borrows heavily from the GDPR.

Complying with the enhanced obligations imposed by the GDPR and other applicable international and U.S.

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Changes in laws and policy relating to taxes or trade may have an adverse effect on our business, financial condition and results of operations.

For example, on December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act, or the TCJA, which significantly reforms the Code.

The TCJA, among other things, includes changes to U.S.

federal tax rates, imposes significant additional limitations on the deductibility of interest and net operating loss carryforwards, allows for the expensing of capital expenditures, and puts into effect the migration from a “worldwide” system of taxation to a territorial system.

For example, on December 22, 2017, the Tax Cuts and Jobs Act, or the TCJA, was signed into law, which resulted in significant reforms to the Code.

The TCJA, among other things, included changes to U.S.

federal tax rates, imposed significant additional limitations on the deductibility of interest and net operating loss carryforwards, allowed for the expensing of capital expenditures, and puts into effect the migration from a “worldwide” system of taxation to a territorial system.

Our net deferred tax assets and liabilities were revalued at the newly enacted U.S.

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The impact of this tax reform on holders of our securities is also uncertain and could be adverse.

This Annual Report on Form 10-K does not discuss any such tax legislation or the manner in which it might affect us or

purchasers of our securities.

This Annual Report on Form 10-K does not discuss any such tax legislation or the manner in which it might affect us or purchasers of our securities.

We urge our investors to consult with their legal and tax advisors with respect to such legislation and the potential tax consequences of investing in our securities.

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Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business.

For example, over the last several years, including beginning in December 2018, the U.S.

For example, over the last several years, the U.S.

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

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There are several third-party drug candidates that could compete with drug candidates in our pipeline.

Drug candidates interfering with the function of type 2 helper T-cells, or Th2, the biological pathway for PRS-060/AZD1402, and thus competing with PRS-060/AZD1402, include those that are being developed by Sanofi/Regeneron (dupilumab), GSK (mepolizumab), Teva (reslizumab), benralizumab (AstraZeneca, IL-5Rá), REGN-3500/SAR-440340 (Regeneron/Sanofi, IL-33), and Amgen/AstraZeneca (tezepelumab).

Drugs targeting immunomodulatory targets and thus competing with our 300-series programs include those that are currently marketed by Bristol-Myers Squibb (ipilimumab, nivolumab), Merck & Co (pembrolizumab), Roche (atezolizumab), Merck Serono/Pfizer (avelumab) and AstraZeneca (durvalumab),among others and drug candidates being developed by Bristol-Myers Squibb (for example, urelumab/anti-CD137), Pfizer (for example, utomilumab/anti-4-1BB) and other clinical stage drug candidates also compete with our proprietary and partnered IO programs.

Additionally, a number of other companies, such as Amgen, Affimed, Macrogenics, F-Star, Molecular Partners, Xencor, Immunocore and Zymeworks, also pursue multispecific approaches in oncology, which therapies are in clinical or preclinical development.

For additional information about our third-party drug candidates that could compete with the drug candidates in our pipeline, see "Business--Competition."

Drug candidates interfering with the function of type 2 helper T cells, or Th2, the biological pathway for PRS-060/AZD1402, and thus anticipated to compete with PRS-060/AZD1402, include those that are being developed or commercialized by Sanofi/Regeneron (dupilumab), GSK (mepolizumab), Teva (reslizumab), benralizumab (AstraZeneca, IL-5Rá), REGN-3500/SAR-440340 (Regeneron/Sanofi, IL-33) and Amgen/AstraZeneca (tezepelumab).

Drugs targeting immunomodulatory targets and thus anticipated to compete with our 300-series programs include those that are currently marketed by Bristol-Myers Squibb (ipilimumab and nivolumab), Merck & Co (pembrolizumab), Roche (atezolizumab), Merck Serono/Pfizer (avelumab) and AstraZeneca (durvalumab),among others and drug candidates being developed by Bristol-Myers Squibb (for example, urelumab), Pfizer (for example, utomilumab) and other clinical stage drug candidates also compete with our proprietary and partnered IO programs.

Additionally, a number of other companies, such as Amgen, Affimed, Macrogenics, Daiichi Sankyo, F-star, Inhibrx, Molecular Partners, Xencor, Immunocore and Zymeworks, also are pursuing multispecific or targeted approaches in oncology, and have therapies in development or already commercialized.

In addition, with respect to cinrebafusp alfa, HER2-targeted therapies in development or already commercialized could compete with us, including drugs developed by Daiichi Sankyo (trastuzumab deruxtecan), Macrogenics (Margetuximab) and Zymeworks (zanidatamab), For additional information about third-party drug candidates that could compete with the drug candidates in our pipeline, see “Business--Competition.”

These existing or future competing products may provide therapeutic convenience or clinical or other benefits for a specific indication greater than our products or may offer comparable performance at a lower cost.

If our products fail to capture and maintain market share, we may not achieve sufficient product revenue and our business will suffer.

If any of our products for which we receive regulatory approval fail to capture and maintain market share, we may not achieve sufficient product revenue and our business will suffer.

Many of our competitors have substantially greater financial, technical and other resources than we do, such as larger research and development staff and experienced marketing and manufacturing organizations, as well as significantly greater experience in:

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We would be required to pay any amounts awarded by a court or negotiated in a settlement that exceed the coverage limitations or that are not covered by any product liability insurance we may obtain, and we may not have, or be able to obtain, sufficient capital to pay such amounts.

A successful product liability claim or series of claims brought against us could cause our stock price to fall and, if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business, operations, and our prospects.

We will need to grow the size of our organization, and we may not successfully manage any growth we may achieve.

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We may not be able to complete acquisitions on favorable terms, if at all.

If we do complete an acquisition, we cannot assure you that it will ultimately strengthen our competitive position or that it will be viewed positively by customers, financial markets or investors.

If we do complete an acquisition, we cannot assure you that it will ultimately strengthen our competitive position or that it will be viewed positively by financial markets or investors.

Furthermore, future acquisitions could pose numerous additional risks to our operations, including:

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• the assumption of significant liabilities that exceed the limitations of any applicable indemnification provisions or the financial resources of any indemnifying party;

inability to maintain relationships with key customers, vendors and other business partners of the acquired businesses;

• inability to maintain relationships with key business partners of the acquired businesses;

• diversion of management’s attention from their day-to-day responsibilities;

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• that historical financial information may not be representative or indicative of our results as a combined company.

The United Kingdom’s withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business.

In June 2016, the United Kingdom held a referendum in which voters approved an exit from the European Union, commonly referred to as “Brexit.” The United Kingdom officially withdrew from the European Union on January 31, 2020.

The British government is continuing to negotiate the terms of the United Kingdom's future relationship with the European Union during a transitionary period that is due to end on December 31, 2020.

A substantial amount of uncertainty remains regarding the outcome of the ongoing negotiations.

Depending on the terms of Brexit after the conclusion of the transition period, the extent Brexit will impact the business and regulatory environment in the United Kingdom, the rest of the European Union, or other countries, remains unknown.

Brexit could, among other outcomes, disrupt the free movement of goods, services and people between the United Kingdom and the European Union, and result in increased legal and regulatory complexities, as well as potential higher costs of conducting business in Europe.

The United Kingdom’s withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business, including our ability to obtain regulatory approvals in the United Kingdom or the European Union.

The United Kingdom officially withdrew from the European Union on January 31, 2020 in a decision commonly referred to as “Brexit,” and the consequent transitionary period came to an end on December 31, 2020.

A substantial amount of uncertainty remains regarding the implementation of Brexit and changes to the relationship between the United Kingdom and the European Union.

Depending on the terms and manner of implementation of Brexit after the conclusion of the transition period, the extent Brexit will impact the business and regulatory environment in the United Kingdom, the European Union or other countries, remains unknown.

In 2021 and beyond, Brexit could, among other outcomes, disrupt the free movement of goods, services and people between the United Kingdom and the European Union, and result in increased legal and regulatory complexities as well as potential higher costs of conducting business in Europe.

Brexit could also result in similar referendums or votes in other European countries in which we do business.

Given the lack of comparable precedent, it is unclear what financial, trade and legal implications Brexit will have and how it will affect us.

For example, Brexit could result in the United Kingdom or the European Union significantly altering its regulations affecting the clearance or approval of our product candidates that are developed in the United Kingdom or the European Union.

Any new regulations could add time and expense to the conduct of our business, as well as the process by which our products receive regulatory approval in the United Kingdom, the European Union and elsewhere.

In addition, the announcement of Brexit and the withdrawal of the United Kingdom from the European Union have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets.

In connection with Brexit, the United Kingdom and the European Union entered into a trade agreement known as the Trade and Cooperation Agreement, which is provisionally applicable as of January 1, 2021 but has not yet been ratified by the European Parliament.

This agreement is intended to govern the legal relationship between the European Union and the United Kingdom post-Brexit.

We are currently evaluating the potential impacts of the new Trade and Cooperation Agreement on our business.

Brexit could result in the United Kingdom or the European Union significantly altering regulations affecting the clearance or approval of our product candidates that are developed in the United Kingdom or the European Union.

Since a significant portion of the regulatory framework in the United Kingdom is derived from European Union directives and regulations, Brexit and the end of the transitionary period could materially impact the regulatory regime with respect to the approval of our product candidates in the United Kingdom or the European Union.

Any delay in obtaining, or inability to obtain, any marketing approvals in the United Kingdom as a result of Brexit, the end of the transitionary period or otherwise, would prevent us from commercializing our product candidates in the United Kingdom and reduce our ability to generate revenue and achieve and sustain profitability.

If any of these outcomes occur, we may be forced to restrict or delay efforts to seek regulatory approval in the United Kingdom for our product candidates, which could significantly and materially harm our business.

In addition, the announcement, negotiation and implementation of Brexit and the withdrawal of the United Kingdom from the European Union have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and they may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets.

Any of these effects of Brexit, among others, could adversely affect our business, our results of operations, liquidity and financial condition.

As another example, we currently rely on multiple CMOs for all of our clinical supplies, including APIs, drug substances and finished drug products, and label and packaging for our preclinical research and clinical trials, including the phase 1 study for PRS-060/AZD1402 and the phase 1 studies for PRS-343, and any tariffs, differing regulatory requirements and other restrictions on the free movement of goods between the United Kingdom and the European Union that result from Brexit may have an adverse impact on this part of our supply chain.

As another example, we currently rely on multiple CMOs for all of our clinical supplies, including APIs, drug substances and finished drug products, and label and packaging for our preclinical research and clinical trials, including the phase 2a study for PRS-060/AZD1402 and the phase 1 studies for cinrebafusp alfa, and any tariffs, differing regulatory requirements and other restrictions on the free movement of goods between the United Kingdom and the European Union that result from Brexit may have an adverse impact on this part of our supply chain.

This could therefore negatively impact our clinical operations and, in particular, the advancement of our lead respiratory program, PRS-060/AZD1402, which would adversely affect our business, our results of operations and financial condition.

Our business may be adversely affected by the ongoing coronavirus pandemic.

Our business could be adversely affected by health epidemics in regions where we have our research and development operations, ongoing preclinical or clinical studies, contract research or manufacturing activities, collaboration partner activities or other business activities and could cause significant disruption in the operations of third-party manufacturers and contract research organizations upon which we rely.

For example, the outbreak in late 2019 of the novel strain of virus named SARS-CoV-2 (severe acute respiratory syndrome coronavirus 2), or coronavirus, which causes coronavirus disease 2019, or COVID-19, evolved into a global pandemic that has spread to most regions of the world and is ongoing.

As a result of the coronavirus pandemic, we may experience disruptions that could severely impact our business, clinical trials and pre-clinical studies, including:

• An impact on various aspects of our planned or ongoing clinical trials.

Potential impacts of the coronavirus pandemic on our various clinical trials include patient dosing and study monitoring, which may be paused or delayed due to changes in policies at various clinical sites, federal, state, local or foreign laws, rules and regulations, including quarantines or other travel restrictions, prioritization of healthcare resources toward pandemic efforts, including diminished attention of physicians serving as our clinical trial investigators and reduced availability of site staff supporting the conduct of our clinical trials, interruption or delays in the operations of the FDA, or other reasons related to the coronavirus pandemic.

If the coronavirus pandemic continues, other aspects of our clinical trials may be adversely affected, delayed or interrupted, including, for example, site initiation, patient recruitment and enrollment, availability of clinical trial materials and data analysis.

Some patients and clinical investigators may not be able to comply with clinical trial protocols and patients may choose to withdraw from our studies or we may have to pause enrollment or we may choose to or be required to pause enrollment and/or patient dosing in our ongoing clinical trials in order to preserve healthcare resources and protect trial participants.

It is unknown how long these pauses or disruptions could continue.

• Our reliance on third parties to, among other things, manufacture drug substance and drug product for our clinical trials, ship investigational drugs and clinical trial samples, perform quality testing and supply other goods and services to run our business.

If any such third party in our international supply chain for materials is adversely impacted by restrictions resulting from the coronavirus pandemic, including staffing shortages, production slowdowns and disruptions in delivery systems, our supply chain may be disrupted, limiting our ability to manufacture our product candidates for our clinical trials and conduct our research and development operations.

• Our request that most of our personnel in both the United States and Germany work remotely, including all of our administrative employees, restricted on-site staff to only those who must perform essential activities that must be completed on-site, limited the number of staff in any given research and development laboratory and implemented policies to protect the health of those staff.

Our increased reliance on personnel working from home may negatively impact productivity or disrupt, delay or otherwise adversely impact our business.

In addition, this could increase our cybersecurity risk, create data accessibility concerns and make us more susceptible to communication disruptions, any of which could adversely impact our business operations or delay necessary interactions with local and federal regulators, ethics committees, manufacturing sites, research or clinical trial sites and other important agencies and contractors.

• Our employees and contractors conducting research and development activities who may not be able to access our laboratory for an extended period of time if we or governmental authorities potentially modify current restrictions.

As a result, this could delay timely completion of preclinical activities and initiation of additional clinical trials for our programs.

• Health regulatory agencies globally may experience disruptions in their operations as a result of the coronavirus pandemic.

The FDA and comparable foreign regulatory agencies may have slower response times or be under-resourced to continue to monitor our clinical trials and, as a result, review, inspection and other timelines may be materially delayed.

It is unknown how long these disruptions could continue, were they to occur.

Any elongation or de-prioritization of our clinical trials or delay in regulatory review resulting from such disruptions could materially affect the development and study of our product candidates.

For example, regulatory authorities may require that we

not distribute a product candidate lot until the relevant agency authorizes its release.

Such release authorization may be delayed as a result of the coronavirus pandemic and could result in delays to our clinical trials.

• The trading prices for our common stock and other biopharmaceutical companies which have been highly volatile due to the coronavirus pandemic.

As a result, we may face difficulties raising capital through sales of our common stock or such sales may be on unfavorable terms.

In addition, a recession, depression or other sustained adverse market event resulting from the spread of the coronavirus could materially and adversely affect our business and the value of our common stock.

The coronavirus pandemic continues to evolve.

The ultimate impact of the coronavirus pandemic on our business operations is highly uncertain and subject to change and will depend on future developments, which cannot be accurately predicted, including the duration of the pandemic, the ultimate geographic spread of the disease, additional or modified government actions, new information that will emerge concerning the severity and impact of COVID-19 and the actions taken to contain coronavirus or address its impact in the short and long term, among others.

We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, our research programs, healthcare systems or the global economy.

We will continue to monitor the situation closely.

Risks Related to the Discovery and Development of Our Drug Candidates

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We currently have no products that are approved for commercial sale.

We expect that a substantial portion of our efforts and expenditures over the next few years will be devoted to our respiratory programs, including PRS-060/AZD1402, our other partnered programs with AstraZeneca, our proprietary respiratory programs, our proprietary IO programs, particularly PRS-343, our partnered programs with Servier including PRS-344, our partnered programs with Seattle Genetics, as well as our other programs.

In partnership with AstraZeneca, PRS-060/AZD1402 is in clinical development with a completed phase 1 SAD study for which data was reported in November 2018, and an ongoing phase 1 MAD study initiated in July 2018.

For PRS-343, a phase 1 study was initiated in the second quarter of 2017 and a phase 1 study of the drug candidate in combination with

atezolizumab was initiated in the third quarter of 2018.

We expect that a substantial portion of our efforts and expenditures over the next few years will be devoted to our respiratory programs, including PRS-060/AZD1402, our other partnered programs with AstraZeneca, our proprietary respiratory programs, our proprietary IO programs, particularly cinrebafusp alfa, our partnered programs with Servier including PRS-344, our partnered programs with Seagen, as well as our other programs.

AstraZeneca has received regulatory approval from two countries for a global phase 2a study of PRS-060/AZD1402.

For cinrebafusp alfa, a phase 1 study was initiated in the second quarter of 2017 and a phase 1 study of the drug candidate in combination with atezolizumab was initiated in the third quarter of 2018.

We presented data from the phase 1 monotherapy study and atezolizumab combination study of cinrebafusp alfa in an oral presentation session at the ESMO Virtual Congress in September 2020.

We are engaged in research and development activities with respect to a number of additional drug candidates and programs.

All of our other drug candidates are in the discovery or early preclinical to IND-enabling stage.

Accordingly, our business is currently substantially dependent on the successful development, clinical testing, regulatory approval and commercialization of PRS-060/AZD1402, PRS-343, PRS 344 and our other IO and respiratory programs, which may never occur.

Accordingly, our business is currently substantially dependent on the successful development, clinical testing, regulatory approval and commercialization of PRS-060/AZD1402, cinrebafusp alfa, PRS 344 and our other IO and respiratory programs, which may never occur.

Before we can generate any revenues from sales of our lead drug candidates, we must complete the following activities for each of them, any one of which we may not be able to successfully complete:

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• establish and maintain adequate health care coverage and reimbursement;

ensure continued compliance with any post-marketing requirements imposed by regulatory authorities, including any required post-marketing clinical trials or the elements of any post-marketing Risk Evaluation and Mitigation Strategy, or REMS, that may be required by the FDA or comparable requirements in other jurisdictions to ensure the benefits of the product outweigh its risks;

• ensure continued compliance with any post-marketing requirements imposed by regulatory authorities, including any required post-marketing clinical trials or the elements of any post-marketing REMS that may be required by the FDA or comparable requirements in other jurisdictions to ensure the benefits of the product outweigh its risks;

• maintain continued acceptable safety profile of the product candidates following approval;

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

Clinical testing of PRS-060/AZD1402 and PRS-343 was initiated in 2017, while clinical testing for other programs, including our other IO programs, has not yet commenced, and the results of any future clinical trials or preclinical studies of these programs, if unsuccessful, could lead to our abandonment of the development of those drug candidates.

Clinical testing of PRS-060/AZD1402 and cinrebafusp alfa was initiated in 2017 and is ongoing, while clinical testing for other programs, including our other IO programs, has not yet commenced, and the results of any future clinical trials or preclinical studies of these programs, if unsuccessful, could lead to our abandonment of the development of those drug candidates.

If studies of these drug candidates produce unsuccessful results and we are forced or elect to cease their development, our business and prospects would be substantially harmed.

Preclinical and clinical testing of our drug candidates that has been conducted to date or will be conducted in the future may not have been or may not be performed in compliance with applicable regulatory requirements, which could lead to increased costs or material delays for their further development.

Given the complexity as well as the uncertainty inherent in biopharmaceutical preclinical and other nonclinical studies and clinical trials, and because of our limited operating experience, we may discover that our own development activities are not in compliance with applicable regulatory requirements or are otherwise deficient, and therefore, determine that the development of our drug candidates on the basis of those trials and studies is not warranted or will be delayed.

We have also entered into license, partnership, and option arrangements, such as with Servier, AstraZeneca, Seattle Genetics, and ASKA, which has been terminated, relating to certain drug candidates and may continue to do so in the future.

Given the complexity as well as the uncertainty inherent in preclinical and other nonclinical studies and clinical trials, and because of our limited operating experience, we may discover that our own development activities are not in compliance with applicable regulatory requirements or are otherwise deficient, and therefore, determine that the development of our drug candidates on the basis of those trials and studies is not warranted or will be delayed.

We have also entered into license, partnership and option arrangements, such as with Servier, AstraZeneca and Seagen, relating to certain drug candidates and we may continue to do so in the future.

Under some of these arrangements, the development of some of those drug candidates has been, or in the future may be, conducted wholly by such partners or third parties with which the partners contract.

As a result, we have not been or may not be closely involved with or have any control over those development activities.

Although some of such partners have provided information regarding those drug candidates and the related studies conducted to date, including certain data that is included in this Annual Report on Form 10-K, we have not received and may not receive in the future comprehensive information regarding all of those development activities, including the raw data from certain studies that have been conducted, information regarding the design, procedural implementation and structure and information regarding the manufacture of the drug candidates used in the studies.

Although some of our partners have provided information regarding those drug candidates and the related studies conducted to date, including data that is included in this Annual Report on Form 10-K, we have not received and may not receive in the future, comprehensive information regarding all of those development activities, including the raw data from certain studies that have been conducted, information regarding the design, procedural implementation and structure and information regarding the manufacture of the drug candidates used in the studies.

Because we may have limited or no input on the development of these drug candidates, we may discover that all or certain elements of the trials and studies our partners have performed have not been, or may not in the future be, in compliance with applicable regulatory standards or have otherwise been or may be deficient, and that advancement of the development of these drug candidates on the basis of those trials and studies is not warranted.

Further, the majority of our development activities for each of our drug candidates, including our phase 1 study with PRS-060/AZD1402 in Australia and our phase 1 study with PRS-343 in the United States, and our anticipated future clinical trials, have been, are being, or may in the future be conducted in or outside the United States, including in Europe or Australia.

Further, the majority of our development activities for each of our drug candidates, including our recently-completed phase 1 study with PRS-060/AZD1402 in Australia, phase 2 drug supply efforts in Australia and Europe, as well as our phase 1 study with cinrebafusp alfa in the United States and our anticipated future clinical trials, have been, are being or may in the future be conducted in or outside the United States, including in Europe or Australia.

We may also conduct some of our future development activities in other countries or regions.

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We may not be successful in our efforts to build a pipeline of drug candidates.

A key element of our strategy is to use and expand our Anticalin drug platform to build a pipeline of drug candidates to address different targets and advance those drug candidates through clinical development for the treatment of a variety of different

types of diseases.

Although our research efforts to date have resulted in identification of a series of targets, we may not be able to develop drug candidates that have good drug-like properties (target affinity, stability, half-life, etc.) and are safe and effective inhibitors or promoters of all or any of these targets.

Even if we are successful in building a product pipeline, the potential drug candidates that we identify may not be suitable for clinical development for a number of reasons, including causing harmful side effects or demonstrating other characteristics that indicate a low likelihood of receiving marketing approval or achieving market acceptance.

Although our research efforts to date have resulted in identification of a series of targets, we may not be able to develop drug candidates that have good drug-like properties (including characteristics such as target affinity, stability and half-life) and are safe and effective inhibitors or promoters of all or any of these targets.

Even if we are successful in building a product pipeline, the potential drug candidates that we identify may not be suitable for clinical development for a number of reasons, including that they may cause harmful side effects or demonstrate other characteristics that indicate a low likelihood of receiving marketing approval or achieving market acceptance.

If our methods of identifying potential drug candidates fail to produce a pipeline of potentially viable drug candidates, then our success as a business will be dependent on the success of fewer potential drug candidates, which introduces risks to our business model and potential limitations to any success we may achieve.

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Therefore, the results of any ongoing or future clinical trials we conduct may not be successful.

We initiated phase 1 studies for PRS-060/AZD1402 and PRS-343 in 2017 and initiated a phase 1 study of PRS-343 in combination with atezolizumab in 2018.

We initiated phase 1 studies for PRS-060/AZD1402 and cinrebafusp alfa in 2017 and initiated a phase 1 study of cinrebafusp alfa in combination with atezolizumab in 2018.

We may however experience delays in pursuing those or any other clinical trials, and any planned clinical trials may not begin on time, may require redesign, may not enroll sufficient healthy volunteers or patients in a timely manner and may not be completed on schedule, if at all.

Clinical trials may be delayed, suspended or prematurely terminated because costs are greater than we anticipate or for a variety of reasons, such as:

Additional clinical trials may be delayed, suspended or prematurely terminated because costs are greater than we anticipate or for a variety of reasons, such as:

• delay or failure in reaching agreement with the FDA or a comparable foreign regulatory authority on a trial design that we are able to execute;

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We rely and plan to continue to rely on CROs, CMOs and clinical trial sites to ensure the proper and timely conduct of our clinical trials.

Although we have and expect that we will have agreements in place with CROs and CMOs governing their contracted activities and conduct, we will have limited influence over their actual performance.

Although we have and expect that we will continue to have agreements in place with CROs and CMOs governing their contracted activities and conduct, we will have limited influence over their actual performance.

As a result, we ultimately do not and will not have control over a CRO’s or CMO’s compliance with the terms of any agreement it may have with us, its compliance with applicable regulatory requirements or its adherence to agreed-upon time schedules and deadlines, and a future CRO’s or CMO’s failure to perform those obligations could subject any of our clinical trials to delays or failure.

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A suspension or termination

may be due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements, inspection of the clinical trial operations or trial site by the FDA, EMA or other regulatory authorities, exposing participants to health risks caused by unforeseen safety issues or adverse side effects, development of previously unseen safety issues, failure to demonstrate a benefit from using a drug candidate, or changes in governmental regulations or administrative actions.

Therefore, we cannot predict with any certainty the schedule for commencement or completion of any currently ongoing, planned or future clinical trials.

may occur due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements, inspection of the clinical trial operations or trial site by the FDA, EMA or other regulatory authorities, exposing participants to health risks caused by unforeseen safety issues or adverse side effects, development of previously unseen safety issues, failure to demonstrate a benefit from using a drug candidate or changes in governmental regulations or administrative actions.

We cannot predict with any certainty the schedule for commencement or completion of any currently ongoing, planned or future clinical trials.

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

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• the severity of the disease under investigation;

the frequency of the molecular alteration we are seeking to target in the applicable trial;

• the frequency of the molecular alteration we are seeking to target in the applicable trial (e.g., HER2 positivity and expression levels in our clinical studies of cinrebafusp alfa);

• the patient eligibility criteria for the clinical trial in question;

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Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional nonclinical studies or clinical trials.

We have not submitted a marketing application such as a BLA to the FDA, a marketing authorisation application, or MAA, to the EMA, or any similar application to any other jurisdiction.

We have not submitted a marketing application such as a BLA to the FDA, an MAA to the EMA or any similar application to any other jurisdiction.

We have limited experience in planning and conducting the clinical trials required for marketing approvals, and we have and expect to continue to rely on third-party CROs to assist us in this process.

Obtaining marketing approval requires the submission of extensive nonclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy.

Securing marketing approval also requires the submission of information about the product manufacturing process, and in many cases the inspection of manufacturing, processing, and packaging facilities by the regulatory authorities.

regulatory authorities.

Our product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use, or there may be deficiencies in cGMP compliance by us or by our CMOs that could result in the candidate not being approved.

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• the change of the medical standard of care or the approval policies or regulations of the FDA, EMA or comparable foreign regulatory authorities may significantly change in a manner that renders our clinical data insufficient for approval.

The time and expense of the approval process, as well as the unpredictability of future clinical trial results and other contributing factors, may result in our failure to obtain regulatory approval to market, in one or more jurisdictions, PRS-060/AZD1402, PRS-343, PRS-344, our other respiratory and IO programs, our discovery stage programs, or any other drug candidates we are developing or may seek to develop in the future, which would significantly harm our business, results of operations and prospects.

The time and expense of the approval process, as well as the unpredictability of future clinical trial results and other contributing factors, may result in our failure to obtain regulatory approval to market, in one or more jurisdictions, PRS-060/AZD1402, cinrebafusp alfa, PRS-344, our other respiratory and IO programs, our discovery stage programs or any other drug candidates we are developing or may seek to develop in the future, which would significantly harm our business, results of operations and prospects.

In such case, we may also not have the resources to conduct new clinical trials and/or we may determine that further clinical development of any such drug candidate is not justified and may discontinue any such programs.

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Any of the foregoing circumstances could materially harm the commercial prospects for our drug candidates.

Additionally, on June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the European Union, commonly referred to as Brexit.

The United Kingdom officially withdrew from the European Union on January 31, 2020.

Since a significant proportion of the regulatory framework in the United Kingdom is derived from European Union directives and regulations, Brexit could materially impact the regulatory regime with respect to the approval of our product candidates in the United Kingdom or the European Union.

Any delay in obtaining, or an inability to obtain, any marketing approvals in the United Kingdom, as a result of Brexit or otherwise, would prevent us from commercializing our product candidates in the United Kingdom and reduce our ability to generate revenue and achieve and sustain profitability.

Furthermore, other European countries may seek to conduct referenda with respect to continuing membership with the European Union.

We do not know to what extent Brexit or other comparable initiatives, or any resulting changes, would affect our ability to conduct clinical trials or obtain marketing approval in these jurisdictions, and each could materially impact our ability to conduct clinical trials or obtain marketing approval on a timely basis, or at all.

Our failure to obtain marketing approval in jurisdictions other than the United States and Europe would prevent our product candidates from being marketed in these other jurisdictions.

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In addition, some countries or regions outside the United States and Europe require approval of the sales price of a drug before it can be marketed in that country or region.

In many countries, separate procedures must be followed to obtain reimbursement.

In many countries,

separate procedures must be followed to obtain reimbursement.

Moreover, approval by the FDA, EMA or an equivalent foreign authority does not ensure approval by regulatory authorities in any other countries or regions.

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Further, our resource allocation decisions may result in our use of funds for research and development programs and drug candidates for specific indications that may not yield any commercially viable products.

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

rights to such drug candidate.

Any such failure to properly assess potential drug candidates could result in missed opportunities and/or our focus on drug candidates with low market potential, which would harm our business and financial condition.

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If our contractors do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the data they obtain is compromised due to a failure to adhere to our clinical protocols, legal and regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for, or successfully commercialize, the affected drug candidates.

we will be unable to control whether or not they devote sufficient time and resources to our preclinical and clinical programs.

In addition, we will be unable to control whether or not they devote sufficient time and resources to our preclinical and clinical programs.

These outside contractors may not assign as great a priority to our programs or pursue them as diligently as we would if we were undertaking such programs ourselves.

As a result, our operations and the commercial prospects for the effected drug candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed.

As a result, our operations and the commercial prospects for the affected drug candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed.

These contractors may also have relationships with other commercial entities, some of whom may compete with us.

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We have no experience in drug formulation or manufacturing.

We do not currently have, nor do we plan to acquire, the infrastructure or capability internally, such as our own manufacturing facilities, to manufacture our preclinical and clinical drug supplies for our clinical trials and preclinical studies or commercial quantities of any drug candidates that may obtain regulatory approval.

We do not currently have, nor do we plan to acquire, the infrastructure or capability internally, such as our own manufacturing facilities, to manufacture our preclinical and clinical drug

supplies for our clinical trials and preclinical studies or commercial quantities of any drug candidates that may obtain regulatory approval.

Therefore, we lack the resources and expertise to formulate or manufacture our own drug candidates.

We have entered into agreements with CMOs for the clinical-stage manufacturing of certain drug candidates, including PRS-060/AZD1402, PRS-343, PRS-344, and others.

We have entered into agreements with CMOs for the clinical-stage manufacturing of certain drug candidates, including PRS-060/AZD1402, cinrebafusp alfa, PRS-344, and others.

We plan to enter into agreements with one or more manufacturers to manufacture, supply, store and distribute drug supplies for our current and future clinical trials and/or commercial sales.

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This approval would require new testing and compliance inspections.

Our third-party manufacturers might be unable to formulate and manufacture our drugs in the volume and of the quality required to meet our clinical and commercial needs, if any.

• Our third-party manufacturers might be unable to formulate and manufacture our drugs in the volume and of the quality and cost required to meet our clinical and commercial needs, if any.

• Our future CMOs may not perform as contractually agreed or may not remain in the contract manufacturing business for the time required to supply our clinical trials or to successfully produce, store and distribute our products.

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• If any third-party manufacturer makes improvements in the manufacturing process for our products, we may not own, or may have to share, the intellectual property rights to the innovation.

Each of these risks could delay our clinical trials, the approval, if any, of our drug candidates or the commercialization of our drug candidates, could result in higher costs or could deprive us of potential product revenues.

Each of these risks could delay our clinical trials, the approval, if any, of our drug candidates or the commercialization of our drug candidates, which could result in higher costs or could deprive us of potential product revenues.

Although our agreements with our CMOs require them to perform according to certain cGMP requirements such as those relating to quality control, quality assurance and qualified personnel, we cannot control the conduct of our CMOs to implement and maintain these standards.

If any of our CMOs cannot successfully manufacture material that conforms to our specifications

and the regulatory requirements of the FDA, EMA or other comparable foreign authorities, we would be prevented from obtaining regulatory approval for our drug candidates unless and until we engage a substitute CMO that can comply with such requirements, which we may not be able to do.

If any of our CMOs cannot successfully manufacture material that conforms to our specifications and the regulatory requirements of the FDA, EMA or other comparable foreign authorities, we would be prevented from obtaining regulatory approval for our drug candidates unless and until we engage a substitute CMO that can comply with such requirements, which we may not be able to do.

Any such failure by any of our CMOs would significantly impact our ability to develop, obtain regulatory approval for or market our drug candidates, if approved.

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Furthermore, our business relationships with our product manufacturers and our collaborators may include assumptions, understandings or agreements that are not included in our agreements with them, or that are inaccurately or incompletely represented by their terms.

In addition, key terms in such agreements may be misunderstood or contested, even when we and the other party previously believed that we both had a mutual understanding of such terms.

In addition, key terms in such

agreements may be misunderstood or contested, even when we and the other party previously believed that we both had a mutual understanding of such terms.

Any differences in interpretation or misunderstandings between us and other parties may result in substantial costs and delays with respect to the development, manufacturing or sale of Anticalin drugs, and may negatively impact our revenues and operating results.

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Further, our collaborators may not develop or commercialize products that arise out of our collaborative arrangements or devote sufficient resources to the development, manufacturing, marketing or sale of these products.

In addition, our collaborative partners may have the right to guide strategy regarding prosecution of relevant patent applications, abandon research projects and/or terminate applicable

agreements, including funding obligations, prior to or upon the expiration of the agreed-upon research terms.

In addition, our collaborative partners may have the right to guide strategy regarding prosecution of relevant patent applications, abandon research projects and/or terminate applicable agreements, including funding obligations, prior to or upon the expiration of the agreed-upon research terms.

By entering into such collaborations, we may forego opportunities to collaborate with other third parties who do not wish to be associated with our existing third-party strategic partners.

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Our ASKA Option Agreement is an example of this strategy.

Following the phase 2a study we conducted, ASKA had an option to obtain an exclusive license to develop and commercialize PRS-080 in Japan, South Korea and certain other Asian markets which they did not exercise for strategic reasons.

In February 2017, following the phase 2a study we conducted, ASKA had an option to obtain an exclusive license to develop and commercialize PRS-080 in Japan, South Korea and certain other Asian markets which they did not exercise for strategic reasons.

Exercising this option could have made us eligible to receive more than $80 million in combined option exercise fee and milestones associated with development and commercialization of PRS-080 in the first indication in Japan with further development milestones in additional indications from Japan and other countries within the ASKA territory.

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The FDA or a comparable foreign regulatory authority may also impose requirements for costly post-marketing nonclinical studies or clinical trials (often called “Phase 4 trials”) and post-marketing surveillance to monitor the safety or efficacy of the product.

If we or a regulatory authority discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, production problems or issues with the facility where the product is manufactured or processed, such as product contamination or significant not-compliance with applicable cGMPs, a regulator may impose restrictions on that product, the manufacturing facility or us.

we or a regulatory authority discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, production problems or issues with the facility where the product is manufactured or processed, such as product contamination or significant non-compliance with applicable cGMPs, a regulator may impose restrictions on that product, the manufacturing facility or us.

If we or our third-party providers, including our CMOs, fail to comply fully with applicable regulations, then we may be required to initiate a recall or withdrawal of our products.

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Non-compliance with European Union requirements regarding safety monitoring or pharmacovigilance can also result in significant financial penalties.

Similarly, failure to comply with the European Union’s requirements regarding the protection of personal information can also lead to significant penalties and sanctions.

Similarly, failure to comply with the European Union requirements regarding the protection of personal information can also lead to significant penalties and sanctions.

The FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay marketing approval of our product candidates.

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Our product candidates have never been manufactured on a commercial scale, and there are risks associated with scaling up manufacturing to commercial scale including, among others, cost overruns, potential problems with process scale-up, process reproducibility, stability issues, lot consistency and timely availability of raw materials.

There is no assurance that our manufacturers will be successful in establishing a larger-scale commercial manufacturing process for PRS-060/AZD1402, PRS-343, PRS-344 or other product candidates that achieves our objectives for manufacturing capacity and cost of goods.

There is no assurance that our manufacturers will be successful in establishing a larger-scale commercial manufacturing process for PRS-060/AZD1402, cinrebafusp alfa, PRS-344 or other product candidates that achieves our objectives for manufacturing capacity and cost of goods.

Even if we could otherwise obtain regulatory approval for any product candidate, there is no assurance that our manufacturers will be able to manufacture the approved product to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential launch of the product or to meet potential future demand.

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Even if we are successful in achieving regulatory approval to commercialize a product candidate ahead of our competitors, our product candidates may face competition from biosimilar products.

In the United States, our Anticalin-based product candidates are expected to be regulated by the FDA as biological products and we intend to seek approval for these product candidates pursuant to the BLA pathway.

The Biologics Price Competition and Innovation Act of 2009, or BPCIA, created an abbreviated pathway for FDA approval of biosimilar and interchangeable biological products based on a previously licensed reference product.

In the United States, our Anticalin-based product candidates

are expected to be regulated by the FDA as biological products and we intend to seek approval for these product candidates pursuant to the BLA pathway.

The BPCIA created an abbreviated pathway for FDA approval of biosimilar and interchangeable biological products based on a previously licensed reference product.

Under the BPCIA, an application for a biosimilar biological product cannot be approved by the FDA until 12 years after the original reference biological product was approved under a BLA.

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As a result, its ultimate impact, implementation, and meaning are subject to uncertainty.

uncertain when such processes intended to implement BPCIA may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our product candidates.

While it is uncertain when such processes intended to implement BPCIA may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our product candidates.

We believe that any of our product candidates approved as a biological product under a BLA should qualify for the 12-year period of exclusivity available to reference biological products.

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For example, payors may limit coverage to specific drug products on an approved list, also known as a formulary, which might not include all of the FDA-approved drugs for a particular indication.

Payors may require use of alternative therapies or a demonstration that a product is medically necessary for a particular patient before use of a product will be covered.

Payors may require use of

alternative therapies or a demonstration that a product is medically necessary for a particular patient before use of a product will be covered.

Additionally, payors may seek to control utilization by imposing prior authorization requirements.

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Reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval.

Patients are unlikely to use our products, if they are approved for marketing, unless coverage is provided and reimbursement is adequate to cover a

significant portion of the cost of such products.

Patients are unlikely to use our products, if they are approved for marketing, unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of such products.

If reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval.

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Further, there have been, and may continue to be, legislative and regulatory proposals at the U.S.

federal and state levels and in foreign jurisdictions directed at broadening the availability and containing or lowering the cost of healthcare including plans announced by the Trump Administration to reform the U.S.

pharmaceutical pricing system significantly through rulemaking and executive orders.

In addition, existing legislation aimed at patient affordability in the United States such as the Affordable Care Act may be repealed or replaced.

federal and state levels and in foreign jurisdictions directed at broadening the availability and containing or lowering the cost of healthcare.

The continuing efforts of the government, insurance companies, managed care organizations and other third-party payors to contain or reduce costs of healthcare may adversely affect our ability to set prices for our products that would allow us to achieve or sustain profitability.

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Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained.

Reference pricing used by various EU member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices.

Reference pricing used by various European Union member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices.

In some countries, we may be required to conduct additional clinical trials that compare the cost-effectiveness of our drug candidates to other available therapies in order to obtain reimbursement or pricing approval.

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Therefore, with respect to the commercialization of all or certain of our drug candidates, we may choose to collaborate, either globally or on a territory-by-territory basis, with third parties that have direct sales forces and established distribution systems, either to augment our own sales force and distribution systems or in lieu of our own sales force and distribution systems.

If so, our success will depend, in part, on our ability to enter into and maintain collaborative relationships for such capabilities, such collaborators’ strategic interest in the products under development and such collaborators’ ability to successfully market and sell any such products.

If we are unable to enter into such arrangements when needed on acceptable terms or at all, we may not be able to successfully commercialize any of our drug candidates that receive regulatory approval, or any such commercialization may experience

delays or limitations.

If so, our success will depend, in part, on our ability to enter into and maintain

collaborative relationships for such capabilities, such collaborators’ strategic interest in the products under development and such collaborators’ ability to successfully market and sell any such products.

Further, to the extent that we depend on third parties for marketing and distribution, any revenues we receive will depend upon the efforts of such third parties, and there can be no assurance that such efforts will be successful.

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As a result, our future product revenue will suffer and we may incur significant additional losses.

In addition, certain of our collaboration agreements that provide us with co-commercialization rights with respect to certain partnered programs contain specific commercialization obligations.

If we fail to meet those obligations, our commercialization rights could be impaired.

Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.

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Physicians, other health care providers and third-party payors will play a primary role in the recommendation, prescription and use of any product candidates for which we obtain marketing approval.

Our future arrangements with such third parties may expose us to broadly applicable fraud and abuse and other health care laws and regulations that may constrain our business or financial arrangements and relationships through which we market, sell and distribute any products for which we may obtain

marketing approval.

and relationships through which we market, sell and distribute any products for which we may obtain marketing approval.

Restrictions under applicable domestic and foreign health care laws and regulations include, but are not limited to, the following:

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• state and foreign laws that govern the privacy and security of health information in certain circumstances, including state security breach notification laws, state health information privacy laws and federal and state consumer protection laws, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts;

• the ACA, which among other things, amends the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes, so that a person or entity no longer needs to have actual knowledge of these statutes or specific intent to violate them in order to have committee a violation;

the government may also assert that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for the purposes of the False Claims Act.

Efforts to ensure that our business arrangements with third parties will comply with applicable health care laws and regulations will involve substantial costs.

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Payment obligations terminate on expiration or annulment of the last patent covered by the TUM License that covers a proprietary product or is sublicensed, as applicable.

Pieris and TUM initiated discussions in the second quarter of 2018 to clarify, expand and restructure the TUM License, including the parties’ obligations under such license agreement.

The parties' discussions relate to revised commercial terms and to re-initiating additional collaborations between faculty at TUM and Pieris.

While an amended and restated license agreement has not yet been completed, we intend to enter into such an amendment.

We recorded the probable expected impact of the amendment in research and development expense in 2018, which was an increase in our financial obligations associated with the TUM License of approximately $2.3 million for amounts that would be due in 2019 for 2018 and 2017 sub-licensing activities.

This liability was paid in full in 2019.

Pieris and TUM initiated discussions in the second quarter of 2018, and are in the process of negotiating an amendment to our license agreement, to clarify, expand and restructure the TUM License, including the parties’ obligations under such license agreement.

The contemplated amendment relates to revised commercial terms.

We recorded the probable expected impact of the amendment in research and development expense in 2019.

These discussions may also lead to an increase in our collaborative research activities with TUM .

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We are also obliged to pay low to lower-middle single-digit royalties as a percentage of net sales depending on the amount of net sales in the applicable years.

In the event that we are required to pay a license fee or

royalty to any third party related to the licensed products, our royalty payment obligations to Acquisition Group are reduced by the amount of such third-party fees or payments, up to 50% of the royalty payment for each calendar year due to Acquisition Group.

Payment obligations terminate on a product-by-product and country-by-country basis on the later of 10 years from the first commercial sale of a product incorporating the Enumeral antibody or the last to expire, lapse or be abandoned of a claim from the licensed Enumeral patents filed as of the effective date of the PD-1 In-License that cover the manufacture, use, offer for sale, sale or import of a product incorporating the Enumeral antibody.

In the event that we are required to pay a license fee or royalty to any third party related to the licensed products, our royalty payment obligations to Acquisition Group are reduced by the amount of such third-party fees or payments, up to 50% of the royalty payment for each calendar year due to Acquisition Group.

from the licensed Enumeral patents filed as of the effective date of the PD-1 In-License that cover the manufacture, use, offer for sale, sale or import of a product incorporating the Enumeral antibody.

In connection with our efforts to develop multispecific Anticalin-based proteins designed to engage immunomodulatory targets, during the second quarter of 2017, we entered into the Kelun Agreement.

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As a result, the patent applications we own or license may fail to result in issued patents in the United States or in foreign countries.

Third parties may challenge the validity, enforceability or scope of any issued patents we own or license or any

applications that may issue as patents in the future, which may result in those patents being narrowed, invalidated or held unenforceable.

Third parties may challenge the validity, enforceability or scope of any issued patents we own or license or any applications that may issue as patents in the future, which may result in those patents being narrowed, invalidated or held unenforceable.

Even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from developing similar products that do not fall within the scope of our patents.

If the breadth or strength of protection provided by the patents we hold or pursue is threatened, our ability to commercialize any drug candidates with technology protected by those patents could be threatened.

Further, if we encounter delays in our clinical trials, the period of time during which we would have patent protection for any covered drug candidates that obtain regulatory approval would be reduced.

Further, if we encounter delays in our clinical trials, the period of time during which we would have patent protection for any covered drug candidates that obtain regulatory approval would

Since patent applications in the United States and most other countries are confidential for a period of time after filing, we cannot be certain at the time of filing that we are the first to file any patent application related to our drug candidates.

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Third parties may also hold intellectual property, including patent rights that are important or necessary to the development of our drug candidates, in which case we would need to obtain a license from that third party or develop a different formulation of the product that does not infringe upon the applicable intellectual property, which may not be possible.

Additionally, we may identify drug candidates that we believe are promising and whose development and other intellectual property rights are held by third parties.

Additionally, we may identify drug candidates that we believe are promising and whose development and other intellectual property rights are held by

third parties.

In such a case, we may desire to seek a license to pursue the development of those drug candidates.

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Failure to maintain our portfolio may result in loss of rights that may adversely impact our intellectual property rights, such as rendering issued patents unenforceable or terminating pending applications prematurely.

In addition, under the European Union regulation on classification, labeling and packaging of substances and mixtures, or CLP, and under other regulations in the United States or other countries related to the clinical development of our drug candidates (including, for example, submissions to regulatory authorities such as the FDA and EMA as well as submissions related to obtaining a non-proprietary, or INN and USAN, name for our clinical drug candidates to the World Health Organization, or the WHO, and United States Adopted Name Council, or the USAN Council), we may be required to publicly disclose the composition of our proprietary products or substances, which may facilitate infringement or avoidance of our intellectual property by third parties and may potentially reduce the margin we are able to charge for our products by allowing competitors to more accurately determine our production costs.

Future development of these regulations may have a further negative impact on our revenues and a substantial negative impact on our business.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

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If we are not able to attract and retain highly qualified personnel, we may not be able to successfully implement our business strategy.

Our ability to compete in the highly competitive biotechnology and pharmaceuticals industries depends upon our ability to attract and retain highly qualified personnel.

Our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon our ability to attract and retain highly qualified personnel.

We are highly dependent on our management, scientific and medical personnel, especially Stephen S.

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• for companies with more than 10 employees, the German Termination Protection Act generally restricts termination of employment if the employee has been employed for more than six months, wherein the employee may be terminated only for a particular reason, including certain behavioral or personal reasons relating to the employee or certain developments relating to the business of the employer, such as a business restructuring which reduces the number of employee positions;

special termination protection against unlawful dismissal applies to several other groups of employees, such as an employee that is an officially acknowledged handicapped person, an employee who was appointed as a company’s data protection officer or as a member of the works council of a company, if any, an employee on three years’ maternity leave or a pregnant employee (in these cases, approval of various German authorities is required prior to termination but usually very difficult to obtain);

• special termination protection against unlawful dismissal applies to several other groups of employees, such as an employee that is an officially acknowledged handicapped person, an employee who was appointed as a company’s data protection officer or as a member of the works council of a company, if any, an employee on three years’

maternity leave or a pregnant employee (in these cases, approval of various German authorities is required prior to termination but usually very difficult to obtain);

• if a company engages in a mass layoff, which is deemed to occur when the employer intends to dismiss a large percentage of its employees during a one-month period, prior written notification to the German employment office is required.

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Risks Related to the Ownership of Our Common Stock

Our share price is expected to be volatile and may be influenced by numerous factors, some of which are beyond our control.

Our share price is volatile and may be influenced by numerous factors, some of which are beyond our control.

Market prices for shares of biotechnology companies such as ours are often volatile.

Thus, the quoted price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control.

Thus, the quoted price of our common stock has been, and is likely to continue to be, highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control.

In addition to the factors discussed in this “Risk Factors” section and elsewhere in this Annual Report on Form 10-K, these factors include:

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We lack evidence of the potential benefits that coverage by additional analysts may provide.

We have material weaknesses in our internal controls over financial reporting, and we have had other material weaknesses in the past.

We have had, and have previously reported material weaknesses in our internal controls over financial reporting.

We are required to comply with Section 404 of the Sarbanes-Oxley Act.

Section 404 of the Sarbanes-Oxley Act requires us to conduct an annual review and evaluation of our internal controls and to obtain attestations of the effectiveness of our internal controls over financial reporting by our independent registered public accounting firm.

If we cannot favorably assess the effectiveness of our internal controls over financial reporting, or if our independent registered public accounting firm is unable to provide an unqualified attestation report on the effectiveness of our internal controls over financial reporting, investor confidence and, in turn, our stock price could be materially adversely affected.

As reported in this Annual Report on Form 10-K, we concluded that we had a material weakness in our internal controls over our information technology general controls ("ITGC") related to change and access management process, and as a result, internal controls related to substantially all underlying financial statement accounts and disclosures are ineffective.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we are required to furnish a report by our management on our internal control over financial reporting.

However, while we remain an EGC or a smaller reporting company with less than $100 million in revenue, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.

If we cannot favorably assess the effectiveness of our internal controls over financial reporting, investor confidence and, in turn, our stock price could be materially adversely affected.

As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2019, we concluded that we had a material weakness in 2019 in our internal controls over our information technology general controls, or ITGC, related to change and access management process, and as a result, internal controls related to substantially all underlying financial statement accounts and disclosures were ineffective.

We also identified deficiencies in internal controls over our quarterly revenue recognition procedures, which were not operating effectively for a sufficient period of time in 2019, and certain controls related to the implementation of ASU No.

2014-09 “Revenue from Contracts with Customers” (Topic 606), or ASC 606, which, taken together, led us to determine that we had a material weakness in the revenue recognition process.

These material weaknesses create a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements may not be prevented or detected on a timely basis.

No material financial statement misstatement was identified in relation to these material weaknesses in our internal control over financial reporting.

Management, including our principal executive officer and principal financial officer, believes the consolidated financial statements included in this Annual Report on Form 10-K, fairly represent in all material respects our financial condition, results of operations and cash flows in accordance with U.S.

We cannot assure you that additional material weaknesses or significant deficiencies in our internal control over financial reporting will not be identified in the future.

While we took steps to address these material weaknesses and concluded in 2020 that the material weaknesses had been remediated, such material weaknesses create a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements may not be prevented or detected on a timely basis.

No material financial statement misstatement was identified in relation to the previously reported material weaknesses in our internal control over financial reporting.

Management, including our principal executive officer and principal financial officer, believes the consolidated financial statements included in our Annual Report on Form 10-K for the year ended on December 31, 2019 and this Annual Report on Form 10-K, fairly represent in all material respects our financial condition, results of operations and cash flows in accordance with U.S.

However, we cannot assure you that additional material weaknesses or significant deficiencies in our internal control over financial reporting will not be identified in the future.

Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that will need to be evaluated frequently.

Our failure to remediate our material weakness in internal controls and thereafter to maintain the effectiveness of our internal controls in accordance with the requirements of the Sarbanes-Oxley Act could have a material adverse effect on the tradability of our common stock, which in turn would negatively impact our business.

Our failure to maintain the effectiveness of our internal controls in accordance with the requirements of the Sarbanes-Oxley Act

could have a material adverse effect on the tradability of our common stock, which in turn would negatively impact our business.

We could lose investor confidence in the accuracy and completeness of our financial reports, which could have an adverse effect on the price of our common stock.

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Pursuant to registration statements filed with the SEC, we previously registered for resale shares of our common stock, which included all of the shares of our common stock issued in our private placements and in connection with the closing of the Acquisition.

For example, in November 2019, we registered for resale 18,029,920 shares of common stock consisting of (w) 5,492,960 shares of common stock issued and outstanding at the time of filing such resale registration statement, (x) 3,522,000 shares of common stock issuable upon the conversion of 3,522 shares of our Series C Convertible Preferred Stock, par value $0.001 per share and (y) 9,014,960 shares of common stock issuable upon exercise of common stock purchase warrants.

For example, in November 2019, we registered for resale 18,029,920 shares of common stock consisting of (w) 5,492,960 shares of common stock issued and

outstanding at the time of filing such resale registration statement, (x) 3,522,000 shares of common stock issuable upon the conversion of 3,522 shares of our Series C Convertible Preferred Stock, par value $0.001 per share and (y) 9,014,960 shares of common stock issuable upon exercise of common stock purchase warrants.

The resale registration statements permit the resale of these shares at any time without restriction.

Further, in August 2019, we entered into a sales agreement pursuant to which the we may offer and sell shares of our common stock, from time to time, up to an aggregate gross sales proceeds of $50.0 million through an “at the market offering” program, or the ATM Program, under a shelf registration statement on Form S-3.

During the year ended December 31, 2020, we sold 3,571,428 shares at a price of $2.80 per share under the ATM Program.

The transaction resulted in gross proceeds of $10.0 million, less a 3% contractual commission incurred for the sales agent, resulting in $9.7 million in net proceeds to the Company.

The resale of a substantial number of shares of our common stock in the public market could adversely affect the market price for our common stock and make it more difficult for investors to sell shares of our common stock at times and prices that investors feel are appropriate.

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Further, any future sales of our common stock by us or resales of our common stock by our existing stockholders could cause the market price of our common stock to decline.

Pursuant to our 2019 Employee, Director and Consultant Equity Incentive Plan, or the Pieris 2019 Plan, we are authorized to grant equity awards to our employees, directors and consultants for up to an aggregate of 2,750,000 shares of our common stock reserved for issuance pursuant to the Pieris 2019 Plan, plus an additional 9,975,000 shares granted under the 2018, 2016 and 2014 Plans, including shares that expired or were canceled on or after July 31, 2019 under these plans and become available for grant under the Pieris 2019 Plan.

Pursuant to our 2020 Employee, Director and Consultant Equity Incentive Plan, or the Pieris 2020 Plan, we are authorized to grant equity awards to our employees, directors and consultants for up to an aggregate of 3,500,000 shares of our common stock, plus an additional 12,725,000 shares granted under the 2019, 2018, 2016 and 2014 Plans, including shares that expired or were canceled on or after July 31, 2019 under these plans and become available for grant under the Pieris 2020 Plan.

As of December 31, 2020, we have granted options to purchase approximately 10,011,436 shares of our common stock.

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Our Amended and Restated Articles of Incorporation further provide that any person purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed, to the fullest extent permitted by law, to have notice of and consented to the foregoing provision.

We believe the choice-of-forum provision in our Amended and Restated Articles of Incorporation will help provide for the orderly, efficient and cost-effective resolution of Nevada-law issues affecting us by designating courts located in the State of

Nevada (our state of incorporation) as the exclusive forum for cases involving such issues.

However, this provision may limit a stockholder’s ability to bring a claim in a judicial forum that it believes to be favorable for disputes with us or our directors, officers, employees or agents, which may discourage such actions against us and our directors, officers, employees and agents.

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Our Amended and Restated Articles of Incorporation eliminate to the furthest extent permitted under Nevada law the personal liability of our directors and officers to us, our stockholders and creditors for damages as a result of any act or failure to act in his or her capacity as a director or officer.

Further, our Amended and Restated Articles of Incorporation, our Amended and Restated Bylaws and individual indemnification agreements that we have entered with each of our directors and officers provide that we are obligated to indemnify, subject to certain exceptions, each of our directors or officers to the fullest extent authorized by Nevada law and, subject to certain conditions, to advance the expenses incurred by any director or officer in defending any action, suit or proceeding prior to its final disposition.

Further, our Amended and Restated Articles of Incorporation, our Amended and Restated Bylaws and individual indemnification agreements that we have entered with each of our directors and officers

provide that we are obligated to indemnify, subject to certain exceptions, each of our directors or officers to the fullest extent authorized by Nevada law and, subject to certain conditions, to advance the expenses incurred by any director or officer in defending any action, suit or proceeding prior to its final disposition.

Those indemnification obligations could expose us to substantial expenditures to cover the cost of settlement or damage awards against our directors or officers, which we may be unable to afford.

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We have in the past issued, and we may at any time in the future issue, shares of preferred stock.

In connection with our June 2016 private placement, we issued 4,963 shares of our Series A convertible preferred stock to certain affiliates of Biotechnology Value Fund, L.P., or BVF, each share of which is convertible into 1,000 shares of our common stock, subject to

certain ownership restrictions.

In January 2019, we entered into an exchange agreement with BVF, or the Exchange Agreement, to exchange 5,000,000 shares of our common stock previously held by BVF for 5,000 shares of our Series B convertible preferred stock, each share of which is convertible into 1,000 shares of our common stock, subject to certain ownership restrictions.

In January 2019, we entered into an exchange agreement with BVF to exchange 5,000,000 shares of our common stock previously held by BVF for 5,000 shares of our Series B convertible preferred stock, each share of which is convertible into 1,000 shares of our common stock, subject to certain ownership restrictions.

In connection with our November 2019 private placement, we issued 3,522 shares of our Series C convertible preferred stock to certain affiliates of BVF each share of which is convertible into 1,000 shares of our common stock, subject to certain ownership restrictions.

In March 2020, we entered into another exchange agreement with BVF to exchange 3,000,000 shares of our common stock previously held by BVF for 3,000 shares of our Series D convertible preferred stock, each share of which is convertible into 1,000 shares of our common stock, subject to certain ownership restrictions.

If the holders of our shares of preferred stock convert their shares into common stock, existing holders of our common stock will experience dilution.

Requirements associated with being a public company have increased our costs significantly and have diverted significant company resources and management attention.

We have only been subject to the reporting requirements of the Exchange Act and the other rules and regulations of the SEC since December 2014.

As a public company listed on The Nasdaq Stock Market LLC, we are incurring and will continue to incur significant legal, accounting and other expenses that we did not incur as a private company.

We are subject to the reporting requirements of the Exchange Act, as well as various requirements imposed by the Sarbanes-Oxley Act, rules subsequently adopted by the SEC and Nasdaq to implement provisions of the Sarbanes-Oxley Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.

The listing requirements of the Nasdaq Stock Market require that we satisfy certain corporate governance requirements relating to director independence, distributing annual and interim reports, stockholder meetings, approvals and voting, soliciting proxies, conflicts of interest and a codes of conduct.

Since we are no longer an “emerging growth company” as defined in the JOBS Act, we are no longer able to take advantage of certain exemptions from various reporting requirements that were previously available to us, but which were not available to other public companies that are not emerging growth companies.

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What changed 10-K

Item 1A. Risk Factors