What changed in this filing

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Item 1A. Risk Factors

2022-03-02 compared with 2021-03-31 · 328 added, 234 removed, 983 unchanged (36% of the section changed)

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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.

• Our business has been and may continue to 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.

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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.

• We rely and expect to continue to rely completely on third parties to formulate, manufacture, and transport 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.

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• 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 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 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.

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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.

• 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 broad discretion in how we use our cash, cash equivalents and investments, 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.

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For the years ended December 31, 2021 and 2020, we reported net loss of $45.7 million and $37.2 million, respectively.

As of December 31, 2020, we had an accumulated deficit of $211.4 million.

As of December 31, 2021, we had an accumulated deficit of $257.1

We expect to continue to incur losses for the foreseeable future, and we expect these losses to increase as we continue our development of, and seek regulatory approvals for, our drug candidates and the commercialization of approved products, if any.

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

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.

We have collaborations with major multi-national pharmaceutical companies.

In particular, we have alliances with AstraZeneca and Genentech to treat respiratory diseases, with Genentech also in ophthalmology and with Servier, Seagen, and Boston Pharmaceuticals in IO.

Our partner AstraZeneca is currently in phase 2a studies of PRS-060/AZD1402, our lead respiratory drug candidate, in multiple countries.

Our IO program includes our lead IO drug candidate, cinrebafusp alfa, which is currently in phase 2 studies, as well as PRS-344/S095012 in partnership with Servier, which is currently in phase 1 studies.

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

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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, 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.

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, PRS-220 and PRS-344/S095012, 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.

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

Our ability to secure additional funding from those or other sources could be significantly impacted by a multitude of events that are beyond our control, including, but not limited to, changes in the macroeconomic environment and other events affecting the stock market, including the availability of research and other information, favorable or unfavorable, published by securities or industry analysts and news agencies.

Our ability to secure additional funding from those or other sources could be significantly impacted by a

multitude of events that are beyond our control, including, but not limited to, changes in the macroeconomic environment and other events affecting the stock market, including the availability of research and other information, favorable or unfavorable, published by securities or industry analysts and news agencies.

Raising capital through the sale of equity or securities convertible into equity would result in dilution to our then-existing stockholders, which could be significant depending on the price at which we may be able to sell our securities.

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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 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 obtain capital through collaborative or licensing arrangements, these arrangements could require us to relinquish rights to our Anticalin-based 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.

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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 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.

We are currently conducting clinical development of PRS-060/AZD1402, in partnership with AstraZeneca, cinrebafusp alfa, and PRS-344/S095012, in partnership with Servier, 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.

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Our business is subject to certain risks associated with doing business globally.

One of our growth strategies is to pursue opportunities for our business in several areas of the world, including the United States, Europe (including Germany) and Australia, any or all of which could be adversely affected by the risks set forth below.

One of our growth strategies is to pursue opportunities for our business in several areas of the world, including the United States, Europe (including Germany), Asia and Australia, any or all of which could be adversely affected by the risks set forth below.

Accordingly, we face significant operational risks as a result of doing business internationally, such as:

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• restrictions imposed by local labor practices and laws on our business and operations;

• economic weakness, including inflation, or rapid changes in government, economic and political policies and conditions, political or civil unrest or instability, terrorism or epidemics and other similar outbreaks or events;

• economic weakness, including inflation, or rapid changes in government, economic and political policies and conditions, political or civil unrest or instability, economic or trade sanctions, closure of markets to imports, terrorism or epidemics and other similar outbreaks or events;

• compliance with a wide variety of complex foreign laws, treaties and regulations;

• compliance with the FCPA and other anti-corruption and anti-bribery laws;

• compliance with the U.S.

Foreign Corrupt Practices Act, or the FCPA, and other anti-corruption and anti-bribery laws;

• unexpected changes in tariffs, trade barriers and other regulatory or contractual limitations on our ability to develop or sell our products in certain foreign markets;

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In such cases, we may suffer an exchange loss because we do not currently engage in currency swaps or other currency hedging strategies to address this risk.

As we realize our strategy to expand in the United States, Germany, Australia and elsewhere internationally, our exposure to currency risks will increase.

As we continue to operate and enter into agreements and arrangements in the United States, Germany, Australia and elsewhere internationally, our exposure to currency risks will increase.

We do not manage our foreign currency exposure in a manner that would eliminate the effects of changes in foreign exchange rates.

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dollar will affect our revenues and expenses and could result in exchange losses in any given reporting period.

Given the volatility of exchange rates, we can give no assurance that we will be able to effectively manage our currency transaction risks or that any volatility in currency exchange rates will not have an adverse effect on our results of operations.

Given the volatility of exchange rates, especially as a result of ongoing developments of the COVID-19 pandemic, we can give no assurance that we will be able to effectively manage our currency transaction risks or that any volatility in currency exchange rates will not have an adverse effect on our results of operations.

We are subject to anti-corruption laws, as well as export control laws, customs laws, sanctions laws and other laws governing our operations.

If we fail to comply with these laws, we could be subject to civil or criminal penalties, other

remedial measures and legal expenses, which could adversely affect our business, results of operations and financial condition.

Our operations are subject to anti-corruption laws, including the FCPA, and other anti-corruption laws that apply in countries where we do business and may do business in the future.

The FCPA and these other laws generally prohibit us, our officers, and our employees and intermediaries from bribing, being bribed or making other prohibited payments to government officials or other persons to obtain or retain business or gain some other business advantage.

We may in the future operate in jurisdictions that pose a high risk of potential FCPA violations and we may participate in collaborations and relationships with third parties whose actions could potentially subject us to liability under the FCPA or local anti-corruption laws.

In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted.

We are also subject to other laws and regulations governing our international operations, including regulations administered by the government of the United States, the United Kingdom and authorities in the European Union, such as applicable export control regulations, economic sanctions on countries and persons, customs requirements and currency exchange regulations, collectively referred to as the Trade Control laws.

There is no assurance that we will be completely effective in ensuring our compliance with all applicable anti-corruption laws, including the FCPA, or other legal requirements, including Trade Control laws.

If we are not in compliance with the FCPA and other anti-corruption laws or Trade Control laws, we may be subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses, which could have an adverse impact on our business, financial condition, results of operations and liquidity.

Likewise, any investigation of any potential violations of the FCPA, other anti-corruption laws or Trade Control laws by U.S.

or other authorities could also have an adverse impact on our reputation, our business, results of operations and financial condition.

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.

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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.

These regulations may continue to change due to the ongoing developments of the COVID-19 pandemic.

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.

As there has not been sufficient testing to determine the long-term health and environmental risks of our Anticalin drug candidates and the materials used in the production of such drug candidates and any future products, future regulations may ban the use of our products due to the potential risk they pose to workers or may limit the use of our drug candidates in research and commercial settings.

As there has not been sufficient testing to determine the long-term health and environmental risks of our Anticalin-based drug candidates and the materials used in the production of such drug candidates and any future products, future regulations may ban the use of our products due to the potential risk they pose to workers or may limit the use of our drug candidates in research and commercial settings.

Any such regulations may have a substantial negative impact on our business and revenues and may cause our business to fail.

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If we were to lose the benefits of these loss carryforwards, our future earnings and cash resources would be materially and adversely affected.

We have not currently completed a study to assess whether an ownership change has occurred, or whether there have been multiple ownership changes since the Acquisition.

We completed a Section 382 study through December 31, 2020.

Based on the study, we underwent an ownership change for Section 382 purposes which occurred in February 2018.

As a result of the ownership change, our net operating loss and tax credit carryforwards as of the ownership change dates are subject to limitation under Section 382;

however, these limitations are not expected to result in any of the impacted net operating loss and tax credit carryforwards to expire unutilized.

Any net operating losses or tax credits generated after the February 2018 change are not subject to this annual limitation.

However, subsequent ownership changes, as defined by Section 382, may potentially further limit the amount of net operating loss and tax credit carryforwards that could be utilized to offset future taxable income and tax.

As of December 31, 2021, we had German corporate income tax and trade tax net operating loss carryforwards of approximately $154.8 million and $153.9 million, respectively, which may be used to reduce our future taxable income in Germany.

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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.

With respect to potential impacts of the ongoing novel coronavirus pandemic, see “ The COVID-19 pandemic and its emerging variants, or any future pandemic, could adversely affect our business, including research, clinical trials, supply chain interruptions and financial condition.

As another example, certain clinical development activities related to our partnered phase 2a study of PRS-060/AZD1402 are located in Ukraine, which is currently being invaded by Russia.

This invasion and military conflict could materially disrupt clinical development efforts and may disrupt future planned clinical development activities in the country.

Although the length and impact of this military action is highly unpredictable, clinical trial sites in Ukraine could suspend or terminate trials, and patients could be forced to evacuate or voluntarily choose to relocate far from clinical trial sites, making them unavailable for further dosing or necessary follow-up.

Our partner may be unable, in a timely manner, to identify and secure alternative sites to fulfill the clinical trial activities we had planned to undertake in Ukraine.

If our clinical trials are interrupted or delayed, there may be insufficient data to support regulatory approvals of PRS-060/AZD1402, and data-read outs for the program as well as any commercialization may be delayed, which could reduce our potential revenue and hurt the competitive position of our product candidate.

Any such disruptions to the development of PRS-060/AZD1402, one of our core clinical-stage programs, could have a material adverse impact on our ability to raise additional capital.

In addition, certain of our development efforts, particularly those related to the phase 2 study of PRS-060/AZD1402, which is being conducted in Australia, in addition to multiple other countries, 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.

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, clinical development efforts, prospects, 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.

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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.

In addition, in May 2016, the EU Parliament adopted the comprehensive General Data Privacy Regulation, or the GDPR, to, among other things, impose more stringent data protection requirements for processors and controllers of personal data and provide for greater penalties and fines for noncompliance, including fines in amounts up to €20 million or 4% of total worldwide annual turnover, whichever is higher.

The GDPR became fully effective in May 2018.

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.

privacy laws and regulations may result in significant costs to our business and require us to amend certain of our business practices.

Further, enforcement actions and investigations by regulatory authorities related to data security incidents and privacy violations continue to increase.

The future enactment of more restrictive laws, rules or regulations and/or future enforcement actions or investigations could have a materially adverse impact on us through increased costs or restrictions on our businesses, and noncompliance could result in regulatory penalties and significant legal liability.

For example, in January of 2020, the California Consumer Privacy Act, or CCPA, went into effect, which marked the first U.S.

state to adopt comprehensive privacy legislation.

The CCPA establishes a new privacy framework for covered businesses by creating an expanded definition of personal information, establishing new data privacy rights for California residents, and creating a new and potentially severe statutory damages framework for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to prevent data breaches.

Additionally, a new privacy law, the California Privacy Rights Act, or CPRA, was approved by California voters in November of 2020, and certain provisions are effective as of January 1, 2022, with

full effectiveness as of 2023.

The CPRA significantly modifies the CCPA, potentially resulting in further uncertainty, additional costs and expenses in an effort to comply and additional potential for harm and liability for failure to comply.

Among other things, the CPRA established a new regulatory authority, the California Privacy Protection Agency, which is tasked with enacting new regulations under the CPRA and will have expensed enforcement authority.

Virginia and Colorado enacted similar data protection laws in 2021, which will take effect in 2023, and other U.S.

states have proposals under consideration, increasing the regulatory compliance risk.

Numerous other countries have, or are developing, laws governing the collection, use and transmission of personal information as well.

EU member states and other jurisdictions have adopted data protection laws and regulations, which impose significant compliance obligations.

On May 25, 2018, the GDPR went into effect, implementing a broad data protection framework that expanded the scope of EU data protection law, including to non-EU entities that process, or control the processing of, personal data relating to individuals located in the EU, including clinical trial data.

The GDPR sets out a number of requirements that must be complied with when handling the personal data of EU based data subjects, including:

providing expanded disclosures about how their personal data will be used;

higher standards for organizations to demonstrate that they have obtained valid consent or have another legal basis in place to justify their data processing activities;

the obligation to appoint data protection officers in certain circumstances;

new rights for individuals to be “forgotten” and rights to data portability, as well as enhanced current rights (e.g., access requests);

the principal of accountability and demonstrating compliance through policies, procedures, training and audit;

and a new mandatory data breach regime.

In particular, medical or health data, genetic data and biometric data are all classified as “special category” data under the GDPR and afford greater protection and require additional compliance obligations.

Further, EU member states have a broad right to impose additional conditions—including restrictions—on these data categories.

This is because the GDPR allows EU member states to derogate from the requirements of the GDPR mainly in regard to specific processing situations (including special category data and processing for scientific or statistical purposes).

For example, we are subject to the GDPR and the German federal data privacy law, the Bundesdatenschutzgesetz, and we are subject to the regulatory authority of the Bavarian data protection authority, the BayLDA.

As the EU states continue to reframe their national legislation to harmonize with the GDPR, we will need to monitor compliance with all relevant EU member states’ laws and regulations, including where permitted derogation from the GDPR are introduced.

We are also subject to evolving EU laws on data export, because we transfer data outside of the EU to ourselves or third parties.

The GDPR only permits exports of data outside of the EU where there is a suitable data transfer solution in place to safeguard personal data (e.g., the EU Commission approved Standard Contractual Clauses).

On July 16, 2020, the Court of Justice of the EU, or the CJEU, issued a landmark opinion in the case Maximilian Schrems vs.

Facebook (Case C-311/18) (Schrems II).

This decision calls into question certain data transfer mechanisms as between the EU member states and the US.

The CJEU is the highest court in Europe and the Schrems II decision heightens the burden on data importers to assess U.S.

national security laws on their business future actions of EU data protection authorities are difficult to predict at the early date.

Consequently, there is some risk of any data transfers from the EU being halted.

If we have to rely on third parties to carry out services for us, including processing personal data on our behalf, we are required under GDPR to enter into contractual arrangements to help ensure that these third parties only process such data according to our instructions and have sufficient security measures in place.

Any security breach or non-compliance with our contractual terms or breach of applicable law by such third parties could result in enforcement actions, litigation, fines and penalties or adverse publicity and could cause customers to lose trust in us, which would have an adverse impact on our reputation and business.

Any contractual arrangements requiring the processing of personal data from the EU to us in the United States will require greater scrutiny and assessments as required under Schrems II and may have an adverse impact on cross-border transfers of personal data, or increase costs of compliance.

The GDPR provides an enforcement authority to impose large penalties for noncompliance, including the potential for fines of up to €20 million or 4% of the annual global revenues of the noncompliant company, whichever is greater.

Applicable data privacy and data protection laws may conflict with each other, and by complying with the laws or regulations of one jurisdiction, we may find that we are violating the laws or regulations of another jurisdiction.

Despite our efforts, we may not have fully complied in the past and may not in the future.

If we become liable under laws or regulations applicable to us, we may be required to pay significant fines and penalties, our reputation may be harmed, and we may be forced to change the way we operate.

That could require us to incur significant expenses, which could significantly affect our business.

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

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In the ordinary course of business, we collect, store and transmit large amounts of confidential information (including, among other things, trade secrets or other intellectual property, proprietary business information and personal information).

It is critical that we do so in a secure manner to maintain the confidentiality and integrity of such confidential information.

It is critical that

we do so in a secure manner to maintain the confidentiality and integrity of such confidential information.

We also have outsourced elements of our operations to third parties, and as a result we manage a number of third-party vendors who may or could have access to our confidential information.

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

Significant disruptions of our information technology systems, or those of our third-party vendors, or security breaches could adversely affect our business operations and/or result in the loss, misappropriation and/or unauthorized access, use or disclosure of, or the prevention of access to, confidential information, including, among other things, trade secrets or other intellectual property, proprietary business information and personal information, and could result in financial, legal, business and reputational harm to us.

For example, any such event that leads to unauthorized access, use or disclosure of personal information, including personal information regarding our patients or employees, could harm our reputation, require us to comply with federal and/or state breach notification laws and foreign law equivalents, and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information.

Significant disruptions of our information technology systems, or those of our third-party vendors or business partners, or security breaches could adversely affect our business operations and/or result in the loss, misappropriation and/or unauthorized access, use or disclosure of, or the prevention of access to, confidential information, including, among other things, trade secrets or other intellectual property, proprietary business information and personal information, and could result in financial, legal, business and reputational harm to us.

Security breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above.

While we have implemented security measures to protect our information technology systems and infrastructure, there can be no assurance that such measures will prevent service interruptions or security breaches that could adversely affect our business.

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

A cybersecurity breach could adversely affect our reputation and could result in other negative consequences, including disruption of our internal operations, increased cybersecurity protection costs, lost revenue, or litigation.

tax legislation and future changes to applicable 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, 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.

corporate rate in 2017.

Notwithstanding the reduction in the corporate income tax rate, the overall impact of the TCJA, whether adverse or favorable, remains uncertain and may not become evident for some period of time, and our business and financial condition could be adversely affected as a result.

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 changes to tax laws and regulations, 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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or foreign tax laws and regulations, or their interpretation and application could have an adverse effect on our business, financial conditions and results of operations.

Inadequate funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent our product candidates from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business rely, which could negatively impact our business.

Inadequate funding for or other adverse actions taken by the FDA, the SEC and other government agencies could hinder their ability to hire and retain key leadership and other personnel, prevent our product candidates from being developed or commercialized in a timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business rely, which could negatively impact our business.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory and policy changes.

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In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

During the global response to the COVID-19 pandemic, moreover, there have been strategic redeployments of government resources to priority projects, including FDA and EMA resources and staff, which have affected routine and for-cause manufacturing inspections and could have an impact on the timeline for review and approval of new marketing applications.

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.

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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.

If a prolonged government shutdown occurs, it could significantly affect the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

Further, in our operations as a public company, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

If a prolonged government shutdown or

slowdown occurs, it could significantly affect the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

Further, in our operations as a public company, future government shutdowns or slowdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

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

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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 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.

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), AstraZeneca (benralizumab, IL-5Rα), Connect Biopharma (CBP-201) and Amgen/AstraZeneca (tezepelumab).

Drugs targeting immunomodulatory targets and thus anticipated to compete with our IO 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.”

In addition, with respect to cinrebafusp alfa, HER2-targeted therapies, or therapies targeting HER2+ patients, in development or already commercialized could compete with us, including drugs developed by Daiichi Sankyo (trastuzumab deruxtecan), Macrogenics (Margetuximab) and Zymeworks (zanidatamab), Seagen (tucatinib), and ALX Oncology (ALX-148).

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.

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In addition, any new product that competes with an approved product must demonstrate compelling advantages in efficacy, convenience, tolerability and safety in order to overcome price competition and to be commercially successful.

Accordingly, our competitors may succeed in obtaining patent protection, receiving FDA, EMA or other regulatory approval, or discovering, developing and commercializing medicines before we do, which would have a material adverse effect on our business and ability to achieve profitability from future sales of our approved drug candidates, if any.

Accordingly, our competitors may succeed in obtaining patent protection, receiving FDA, EMA, MHRA or other regulatory approval, or discovering, developing and commercializing medicines before we do, which would have a material adverse effect on our business and ability to achieve profitability from future sales of our approved drug candidates, if any.

For additional information about our competitors, please see "Business--Competition."

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.

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.

We could be subject to product liability lawsuits if any drug candidate we develop allegedly causes injury or is found to be otherwise unsuitable for human use during product testing, manufacturing, marketing or sale.

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Even successful defense would require significant financial and management resources.

Regardless of merit or eventual outcome, liability claims may result in:

• reduced resources of our management to pursue our business strategy;

• decreased demand for any products that we may develop;

• injury to our reputation and significant negative media attention;

• withdrawal of clinical trial participants or sites;

• significant costs to defend the related litigation;

• substantial monetary awards to clinical trial participants or patients;

• loss of revenue;

• increased insurance costs;

• the inability to commercialize any products that we may develop.

Our inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the clinical testing and commercialization of products we develop on our own or with collaborators.

While we currently carry insurance that we believe is appropriate for a company at our stage of development, including with respect to our ongoing clinical trials and studies, our insurance coverage may not reimburse us or may not be sufficient to reimburse us for any expenses or losses we may suffer.

While we currently carry insurance in an amount and on terms and conditions that are customary for similarly situated companies and that are satisfactory to our board of directors, our insurance coverage may not reimburse us or may not be sufficient to reimburse us for any expenses or losses we may suffer.

In the future, we will seek to obtain appropriate insurance coverage with respect to any future clinical trials of our other drug candidates, but we may not be able to obtain the levels of coverage desired on acceptable terms, or at all.

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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.

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.

Depending on the ongoing implementation of Brexit, the full extent to which Brexit may impact the business and

regulatory environment in the United Kingdom, the European Union or other countries, remains unknown.

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

In connection with Brexit, the United Kingdom and the European Union entered into a trade agreement known as the Trade and Cooperation Agreement, which was provisionally applicable as of January 1, 2021 and was ratified by the European Parliament on May 1, 2021.

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.

Any breakdowns in implementation of the Trade and Cooperation Agreement or other Brexit-related arrangements negotiated by the United Kingdom and the European Union 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.

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

In line with the Trade and Cooperation Agreement, the United Kingdom has established its own regulatory framework for product candidates, which is not identical to the European Union regulatory framework.

Industry experience with navigating the two regulatory frameworks is limited at this point in time.

Further regulatory divergences could arise.

Any failure of the European Union and the United Kingdom to implement and maintain the Trade and Cooperation Agreement 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.

Any delay in obtaining, or inability to obtain, any marketing approvals in the United Kingdom as a result of Brexit or failures in the implementation of the Trade and Cooperation Agreement 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.

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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 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:

The COVID-19 pandemic and its emerging variants, or any future pandemic, could adversely affect our business, including research, clinical trials, supply chain interruptions and financial condition.

Our business has been and could continue to be 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 spread to most regions of the world and is still ongoing.

The coronavirus pandemic, and its emerging variants have spread to most countries, including the United States and European and Asia-Pacific countries, and this includes countries in which we have planned or currently have active clinical trial sites.

As a result we have and may continue to 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.

Actual and potentially continuing impacts of the coronavirus pandemic on our various clinical trials include patient dosing and study monitoring, which have been and may continue to 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.

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

For example, due to pandemic lockdowns across the United States, monitoring of the clinical trial sites by our CROs was delayed for the phase 1 cinrebafusp alfa monotherapy and atezolizumab combination studies in 2021.

Remote monitoring was eventually implemented by various sites which permitted our CROs to continue site monitoring.

In addition, our CROs experienced staffing shortages because of the pandemic, which similarly delayed data monitoring, verification, and entry in the studies.

Though it is unclear what impact these delays had, we estimate that the studies were delayed by a

Patient dosing was not impacted and was completed in 2021 in both studies.

Similarly, in 2021, site initiation for PRS-344/S095012 was delayed several weeks at a trial site in Australia due to the travel restrictions between Australian states, as well as site lockdown, which prevented on-site visits.

In addition, 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.

• Our reliance on third parties to, among other things, manufacture and transport 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.

Third parties in our international supply chain for materials have and may continue to be adversely impacted by restrictions resulting from the coronavirus pandemic, or other infectious diseases, including staffing shortages, production slowdowns or halts, and disruptions in delivery systems, which has and may continue to disrupt our supply chain, limiting our ability to manufacture our product candidates for our clinical trials and conduct our research and development operations.

For 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 2 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, or between other countries, as a result of the pandemic 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, and lead oncology programs, including cinrebafusp alfa, which would adversely affect our business, our results of operations and financial condition.

• Our request that most of our personnel in the United States, and some in 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, affect our ability to retain employees 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.

• 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 they get sick and need to quarantine, or if we or governmental authorities potentially modify current restrictions.

For example, our lab operations had experienced some impact due to our employees and contractors becoming sick and needing to quarantine at home.

Although this only minimally affected our productivity, further restrictions limiting access to our laboratory for an extended period could delay timely completion of preclinical activities and initiation of additional clinical trials for our programs.

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

The FDA and comparable foreign regulatory agencies may continue to 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.

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.

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.

• The trading prices for our common stock and other biopharmaceutical companies 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.

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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.

The ultimate impact of the coronavirus pandemic and its emerging variants 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 geographic spread of the disease, additional or modified government actions, new information that will emerge concerning the severity and impact of COVID-19 and its emerging variants and the actions taken to contain coronavirus or address its impact in the short and long term, among others.

We do not 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.

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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 cinrebafusp alfa, our partnered programs with Servier including PRS-344, our partnered programs with Seagen, 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 which interim data was reported in October 2019.

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

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/S095012;

our partnered programs with Seagen, Boston Pharmaceuticals and Genentech;

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, a completed phase 1 MAD study for which interim data was reported in October 2019.

The phase 2a asthma study is ongoing in multiple sites globally.

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 presented data from the phase 1 monotherapy study and atezolizumab combination study of cinrebafusp alfa in an oral presentation at the ESMO Virtual Congress in September 2020, and we presented additional data from the phase 1 monotherapy study of cinrebafusp alfa in an oral presentation at the American Association for Cancer Research Virtual Congress in April 2021.

In June 2021, FDA granted orphan drug designation to cinrebafusp alfa for the treatment of HER2-high and HER2-low expressing gastric cancers.

In January 2022, we dosed the first patient in our two-arm phase 2 study for cinrebafusp alfa in gastric cancer in the United States.

In partnership with Servier, the first patient was dosed in November 2021 for the phase 1/2 study of PRS-344/S095012/S095012.

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

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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 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.

Clinical testing of PRS-060/AZD1402, cinrebafusp alfa and PRS-344/S095012 is ongoing, while clinical testing for other programs, including our other IO and respiratory 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.

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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.

We have also entered into license, partnership and option arrangements, such as with Servier, AstraZeneca, Seagen, Boston Pharmaceuticals and Genentech, 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.

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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 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.

Further, the majority of our development activities for each of our drug candidates, including our completed phase 1 study with PRS-060/AZD1402 in Australia, phase 2a study with PRS-060/AZD1402 at multiple sites globally, our phase 1 and 2 studies with cinrebafusp alfa in the United States, as well as our phase 1/2 study for PRS-344/S095012, and our anticipated future clinical trials, have been, are being or may in the future be conducted in whole or in part outside of the United States, including in Europe, Australia or Asia.

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

As a result, although those studies may meet the standards of applicable foreign regulatory bodies, the structure and design of those clinical trials and preclinical studies may not meet applicable FDA requirements and also may not meet the requirements of the applicable regulatory authorities in other foreign countries in which we desire to pursue marketing approval.

If the studies conducted by us or our partners or collaborators do not comply with applicable regulatory requirements or are otherwise not eligible for continued development in the United States, then we or our partners may be forced to conduct new studies in order to progress the development of our drug candidates.

If the studies conducted by us or our partners or collaborators do not comply with applicable regulatory requirements or are otherwise not eligible for continued development in the United States or abroad, then we or our partners may be forced to conduct new studies in order to progress the development of our drug candidates.

We, or our partners, may not have the funding or other resources to conduct or complete these additional studies, which would severely delay or prevent the development plans for these drug candidates and their commercialization.

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As a result, identifying drug targets based in part on their suitability with Anticalin-brand drug therapeutics, which is a fundamental aspect of our business approach, may not lead to the discovery or development of any drugs that successfully treat patients with the diseases and conditions we intend to target.

Moreover, the lack of successful precedents in the development of Anticalin proteins could result in added complexities or delays in our development efforts.

Moreover, the lack of successful precedents in the development of Anticalin

proteins could result in added complexities or delays in our development efforts.

The failure of the scientific underpinnings of our business model to produce viable drug candidates would substantially harm our operations and prospects.

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.

A key element of our strategy is to use and expand our Anticalin-based 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 (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.

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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 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.

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:

In 2021, we initiated a phase 1 study for PRS-344/S095012 in collaboration with Servier and we also initiated a two-arm phase 2 study for cinrebafusp alfa in combination with tucatinib and in combination with ramucirumab and paclitaxel.

A phase 2a study for PRS-060/AZD1402 was also initiated in 2021.

We or our partners 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.

Additional clinical trials may be delayed, suspended or prematurely terminated because costs are greater than we anticipate or for a variety of reasons (which may be heightened as a result of the ongoing COVID-19 pandemic), 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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A suspension or termination

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.

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, MHRA 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.

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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.

We may not be able to initiate or continue clinical trials for our drug candidates if we are unable to locate and enroll a sufficient number of research subjects to participate in these trials.

We may not be able to initiate or continue clinical trials for our drug candidates if we are unable to locate and enroll a sufficient number of research subjects to participate in these trials, including as a result of challenges posed by the ongoing COVID-19 pandemic..

In particular, for some diseases and conditions we are or will be focusing on, our pool of suitable patients may be smaller and more selective and our ability to enroll a sufficient number of suitable patients may be limited or take longer than anticipated.

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Clinical failure can occur at any stage of clinical development.

Clinical trials may produce negative or inconclusive results, and we or any future collaborators may decide, or regulators may require us, to conduct additional clinical trials or preclinical studies.

We will be required to demonstrate with substantial evidence through well-controlled clinical trials that our product candidates are safe and effective for use in a diverse population before we can seek marketing approvals for their commercial sale.

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We are not permitted to market our biological product candidates in the United States until we receive the respective approval of a BLA from the FDA, or in any foreign countries until we receive the requisite approval from the respective regulatory authorities in such countries.

The time required to obtain approval, if any, by the FDA, EMA and comparable foreign authorities is unpredictable, but typically takes many years following the commencement of clinical trials, if approval is obtained at all, and depends upon numerous factors, including the substantial discretion of the regulatory authorities and the type, complexity and novelty of the product candidates involved.

The time required to obtain approval, if any, by the FDA, EMA, MHRA and comparable foreign authorities is unpredictable, but typically takes many years following the commencement of clinical trials, if approval is obtained at all, and depends upon numerous factors, including the substantial discretion of the regulatory authorities and the type, complexity and novelty of the product candidates involved.

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.

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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.

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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Our drug candidates could fail to receive, or could be delayed in receiving, regulatory approval for many reasons, including any one or more of the following:

• the FDA, EMA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;

• we may be unable to demonstrate to the satisfaction of the FDA, EMA or comparable foreign regulatory authorities that a drug candidate is safe and effective for its proposed indication;

• the results of clinical trials may not meet the level of statistical significance required by the FDA, EMA or comparable foreign regulatory authorities for approval;

• the FDA, EMA, MHRA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;

• we may be unable to demonstrate to the satisfaction of the FDA, EMA, MHRA or comparable foreign regulatory authorities that a drug candidate is safe and effective for its proposed indication;

• the results of clinical trials may not meet the level of statistical significance required by the FDA, EMA, MHRA or comparable foreign regulatory authorities for approval;

• we may be unable to demonstrate that a drug candidate’s clinical and other benefits outweigh its safety risks;

• the FDA, EMA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;

• the FDA, EMA, MHRA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;

• the data collected from clinical trials of our drug candidates may not be sufficient to support the submission of a BLA or other submission or to obtain regulatory approval in the United States or elsewhere;

• upon review of our clinical trial sites and data, the FDA or comparable foreign regulatory authorities may find our record keeping or the record keeping of our clinical trial sites to be inadequate;

• the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies may fail to meet the requirements of the FDA, EMA or comparable foreign regulatory authorities;

• the FDA, EMA or comparable foreign regulatory authorities may fail to approve the companion diagnostics we contemplate developing internally or with partners;

• 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, 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.

• the FDA, EMA, MHRA or comparable foreign regulatory authorities may fail to approve the companion diagnostics we contemplate developing internally or with partners;

• the change of the medical standard of care or the approval policies or regulations of the FDA, EMA, MHRA 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, cinrebafusp alfa, PRS-344/S095012, 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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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.

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

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

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

As a result, the ability to market and sell a drug candidate in more than one jurisdiction can involve significant additional time, expense and effort, and would subject us and our collaborators to the numerous and varying post-approval requirements of each jurisdiction governing commercial sales, manufacturing, pricing and distribution of our drug candidates.

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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.

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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Regulatory authorities enforce cGCP through periodic inspections of trial sponsors, clinical investigators and trial sites.

If we or any of our contractors fail to comply with applicable cGCP, the clinical data generated in the applicable trial may be deemed unreliable and the FDA, EMA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving a drug candidate for marketing, which we may not have sufficient cash or other resources to support and which would delay our ability to generate revenue from future sales of such drug candidate.

If we or any of our contractors fail to comply with applicable cGCP, the clinical data generated in the applicable trial may be deemed unreliable and the FDA, EMA, MHRA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving a drug candidate for marketing, which we may not have sufficient cash or other resources to support and which would delay our ability to generate revenue from future sales of such drug candidate.

Any agreements governing our relationships with CROs or other contractors with whom we currently engage or may engage in the future may provide those outside contractors with certain rights to terminate a clinical trial under specified circumstances.

If such an outside contractor terminates its relationship with us during the performance of a clinical trial, we would be forced to seek an engagement with a substitute contractor, which we may not be able to do on a timely basis or on commercially reasonable terms, if at all, and the applicable clinical trial would experience delays or may not be completed.

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.

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, such as the COVID-19 pandemic, 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.

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

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As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines.

These difficulties may be exacerbated as a result of the COVID-19 pandemic.

Although we carefully manage our relationships with third parties conducting our studies, we cannot assure you that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material and adverse effect on our business, financial condition and results of operations.

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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, 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.

We have entered into agreements with CMOs for the clinical-stage manufacturing of certain drug candidates, including PRS-060/AZD1402, cinrebafusp alfa, and PRS-344/S095012 as well as other drugs involved in our clinical trials and preclinical studies.

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, if any.

We intend to establish or continue those relationships for the supply of our drug candidates;

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If we are unable to maintain those relationships, we could experience delays in our development efforts as we locate and qualify new CMOs.

If any of our current drug candidates or any drug candidates we may develop or acquire in the future receives regulatory approval, we will rely on one or more CMOs to manufacture the commercial supply of such drugs.

If any of our current drug candidates or any drug candidates we may

develop or acquire in the future receives regulatory approval, we will rely on one or more CMOs to manufacture the commercial supply of such drugs.

Our reliance on a limited number of CMOs exposes us to the following risks:

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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, which could result in higher costs or could deprive us of potential product revenues.

Each of these risks could delay our clinical trials, the marketing 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, MHRA 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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Disagreements with respect to the commercial terms of our sales, licensing, purchase or manufacturing agreements may limit our commercial success.

The rights and obligations of the partners to which we may license our Anticalin technology are governed by the licensing and collaboration agreements we enter into with those partners.

The rights and obligations of the partners to which we may license our Anticalin-based technology are governed by the licensing and collaboration agreements we enter into with those partners.

In addition, our relationships with CMOs are governed by the service agreements between us and each of the manufacturers.

Although we attempt to address the full range of possible events that may occur during the development or the manufacturing of Anticalin drug candidates and products, unanticipated or extraordinary events may occur beyond those contemplated by such agreements.

Although we attempt to address the full range of possible events that may occur during the development or the manufacturing of Anticalin-based drug candidates and products, unanticipated or extraordinary events may occur beyond those contemplated by such agreements.

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.

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.

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-based drugs, and may negatively impact our revenues and operating results.

Product manufacturers may fail to produce the products and partners may fail to develop the drug candidates with the diligence or under the timeline or in the manner we anticipated, and results may differ from the terms upon which we had agreed.

As a result, we may be unable to supply drugs of the quality or in the quantity demanded or required.

We may suffer harm to our reputation in the market from missed development goals or deadlines and may be unable to capitalize upon market opportunities as a result.

We may suffer harm to our reputation in the market from missed development goals or deadlines and may be unable to capitalize upon

market opportunities as a result.

Resolution of these problems may entail costly and lengthy litigation or dispute resolution procedures.

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Our prospects, therefore, may depend to some extent upon our ability to attract and retain collaborative partners and to develop technologies and products that meet the requirements of current or prospective collaborative partners.

We have limited control over the amount and timing of resources that our current collaborators or any future collaborators devote to our collaborations or potential products, in particular with respect to our collaborations with AstraZeneca for the development of PRS-060/AZD1402 and with Servier for the development of PRS-344.

These collaborators may breach or terminate their agreements with us or otherwise fail to conduct their collaborative activities successfully and in a timely manner.

Termination of these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new, amended or reinstated agreements with less favorable terms, or cause us to lose our rights under these agreements, including our rights to important intellectual property or technology.

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.

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Our current collaborators and future collaborators will have significant discretion in determining the effort and amount of resources that they dedicate to our collaborations.

Our collaborators may determine not to proceed with clinical development or commercialization of a particular drug candidate for a number of reasons that are beyond our control, even under circumstances where we might have continued such a program, currently including PRS-060/AZD1402 and PRS-344.

In addition, our rights to receive milestone payments and royalties from our collaborators will depend in part on our collaborators’ abilities to establish the safety and efficacy of our drug candidates, obtain regulatory approvals and achieve market acceptance of products developed from our drug candidates.

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• our collaborators may encounter conflicts of interest, changes in business strategy or other business issues that could adversely affect their willingness or ability to fulfill their obligations to us (for example, pharmaceutical and biotechnology companies historically have re-evaluated their priorities following mergers and consolidations, which have been common in recent years in these industries);

• we do not control the conduct and communications of our collaborators, and, thus, we are subject to the risk that their actions may negatively impact our reputation and potentially harm our business;

• disputes may arise between us and our collaborators delaying or terminating the research, development, manufacture or commercialization of our drug candidates, resulting in significant litigation or arbitration that could be time-consuming and expensive, or causing collaborators to act in their own self-interest and not in the interest of our stockholders;

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• our existing collaborators may exercise their respective rights to terminate their collaborations with us without cause, in which event, we might not be able to complete development and commercialization of our drug candidates on our own.

Certain of our research and development and manufacturing activiti es take place in China t hrough third-party manufacturers.

A significant disruption in the operation of those manufacturers could materially adversely affect our business and results of operations.

We have relied on certain third parties located in China to manufacture and supply certain drug substance for our drug product candidates , and we expect to continue to use such third-party manufacturers for such purposes.

A natural disaster, epidemic or pandemic, including the ongoing COVID-19 pandemic, trade war, trade sanctions, political unrest, economic conditions, changes in legislation, including t he passage of the People’s Republic of China Biosecurity law, which became effective on April 15, 2021, or other events in China could disrupt the business or operations of manufacturers or other third parties with whom we conduct business now or in the future.

Any disruption in China that significantly impacts such third parties, including our manufacturers’ ability to produce drug substance or drug product in adequate quantities to meet our needs could impede, delay, limit or prevent the research, development or commercialization of our current and future products or product candidates.

In addition, for any activities conducted in China , we are exposed to the possibility of product supply disruption and increased costs in the event of changes in the policies of the U.S.

or Chinese governments, political unrest or unstable economic conditions including sanctions on China or any of our China-based vendors.

Separately, w e may also be exposed to fluctuations in the value of the local currency in China for goods and services.

Our costs for any of these services or activities could also increase as a result of future appreciation of the local currency in China or increased labor costs if the demand for skilled laborers increases and/or the availability of skilled labor declines in China.

Our collaborative relationships may not produce the financial benefits that we are anticipating, which could cause our business to suffer.

Part of our strategy is to partner with, or out-license selective products to, other pharmaceutical companies in order to mitigate the cost of developing a drug through clinical trials to commercialization.

Our ASKA Option Agreement is an example of this strategy.

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.

Our exclusive option agreement with ASKA Pharmaceuticals Co., Ltd., or ASKA, entered into on February 27, 2017, is an example of this strategy.

In January 2020, following the phase 2a study we conducted, ASKA had an option to obtain an exclusive license to develop and commercialize PRS-080, our anemia drug, in Japan, South Korea and certain other Asian markets under the option agreement, 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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Although we have received upfront, milestone and other payments to date under our current drug development collaborations, we may not receive any royalty payments or additional license and milestone fees under such agreements.

In general, our receipt of milestone, royalty or license payments depends on many factors, including whether our collaborators want and are able to continue to pursue potential drug candidates, intellectual property issues, unforeseen complications in the development or commercialization process, and the ultimate commercial success of the drugs.

In general, our receipt of milestone, royalty or license payments depends on many factors, including whether our collaborators want and are

able to continue to pursue potential drug candidates, intellectual property issues, unforeseen complications in the development or commercialization process, and the ultimate commercial success of the drugs.

Risks Related to the Commercialization of Our Drug Candidates

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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.

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 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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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.

If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability.

approval that we may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability.

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.

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• relative convenience and ease of administration compared to alternative treatments;

• cost-effectiveness of our product relative to competing products;

• the prevalence and severity of any side effects;

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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, cinrebafusp alfa, 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/S095012 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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Failure to successfully discover, develop, manufacture and sell our biological product candidates would adversely impact our business and future results of operations.

Our product candidates for which we intend to seek approval may face generic or biosimilar competition sooner than anticipated.

Our product candidates for which we intend to seek approval may face follow-on or biosimilar competition sooner than anticipated.

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.

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.

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

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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Some countries require approval of the sale price of a drug before it can be marketed.

In many countries, the pricing review period begins after marketing or product marketing approval is granted and, in some markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted.

As a result, we may obtain marketing approval for a product in a particular country, but then be subject to price regulations that delay our commercial launch of the product, possibly for lengthy time periods, and negatively impact the revenues we are able to generate from the sale of the product in that country.

In many countries, the pricing review period begins after marketing approval is granted and, in some markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted.

revenues we are able to generate from the sale of the product in that country.

Adverse pricing limitations may hinder our ability to recoup our investment in one or more product candidates, even if our product candidates obtain marketing approval.

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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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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 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.

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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.

We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and will face an even greater risk with respect to commercial sales of any products that we may develop.

If we cannot successfully defend ourselves against claims that our product candidates or products caused injuries, we will incur substantial liabilities.

Regardless of merit or eventual outcome, liability claims may result in:

• reduced resources of our management to pursue our business strategy;

• decreased demand for any products that we may develop;

• injury to our reputation and significant negative media attention;

• withdrawal of clinical trial participants or sites;

• significant costs to defend the related litigation;

• substantial monetary awards to clinical trial participants or patients;

• loss of revenue;

• increased insurance costs;

• the inability to commercialize any products that we may develop.

We have product liability insurance coverage in an amount and on terms and conditions that are customary for similarly situated companies and that are satisfactory to our board of directors.

The amount of insurance that we currently hold may not be adequate to cover all liabilities that we may incur.

We will need to increase our insurance coverage when and if we begin conducting more expansive clinical development of, or commercializing, our current product candidates or any potential future product candidate of ours.

Insurance coverage is increasingly expensive.

We may not be able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise.

Our relationships with prescribers, purchasers, third-party payors and patients will be subject to applicable anti-kickback, fraud and abuse and other health care laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings.

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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.

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

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

federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under a federal health care program such as Medicare and Medicaid;

a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

federal false claims, false statements and civil monetary penalties laws, including the U.S.

False Claims Act, which impose criminal and civil penalties against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;

actions may be brought by the government or a whistleblower and may include an assertion that a claim for payment by federal health care programs for items and services which results from a violation of the federal Anti-Kickback Statue constitutes a false or fraudulent claim for purposes of the False Claims Act;

Health Insurance Portability and Accountability Act of 1996, or HIPAA, that imposes criminal and civil liability for executing a scheme to defraud any health care benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for health care benefits, items or services;

similar to the U.S.

federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

federal Anti-Kickback Statute, or AKS, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual, or the furnishing, recommending, or arranging of a good or service, for which payment may be made under a federal health care program such as Medicare and Medicaid.

A person or entity does not need to have actual knowledge of the AKS or specific intent to violate it to have committed a violation.

Certain arrangements are protected from enforcement through AKS safe harbors and exceptions, but an arrangement must meet every element of the applicable safe harbor or exception in order to obtain this protection.

The fact that an arrangement does not meet the requirements of a safe harbor or exception does not mean that it violates the AKS;

such arrangements would be subject to a facts and circumstances analysis to determine compliance with the AKS or lack thereof.

The definition of “remuneration” has been broadly interpreted to include anything of value, including such items as gifts, discounts, the furnishing of supplies or equipment, credit arrangements, waiver of payments, and providing anything at less than its fair market value.

The AKS is broadly interpreted and aggressively enforced with the result that beneficial commercial

arrangements can be criminalized in the healthcare industry because of the AKS.

The penalties for violating the federal AKS include imprisonment for up to ten years, fines of up to $100,000 per violation and possible exclusion from federal health care programs such as Medicare and Medicaid.

Additionally, a claim including items or services resulting from a violation of the AKS constitutes a false or fraudulent claim for purposes of the False Claims Act;

False Claims Act, or FCA, prohibits knowingly presenting, or causing to be presented a false claim or the knowing use of false statements or records to obtain payment from the federal government.

The FCA also prohibits the knowing retention of overpayments (sometimes referred to as “reverse false claims”).

When an entity is determined to have violated the FCA, it must pay three times the actual damages sustained by the government, plus mandatory and substantial civil penalties for each separate false claim.

The entity also faces the possibility of exclusion from federal healthcare programs.

Suits filed under the False Claims Act, known as “qui tam” actions, can be brought by any individual on behalf of the government and such individuals (known as “relators” or, more commonly, as “whistleblowers”) may share in any amounts paid by the entity to the government in fines or settlement.

Claims for payment by federal health care programs for items and services which results from a violation of the federal AKS may also constitute a false or fraudulent claims for purposes of the False Claims Act;

Civil Monetary Penalties Law, or CMPL, authorizes the imposition of substantial civil money penalties and the possibility of exclusion against an individual or entity that engages in certain prohibited activities including but not limited to violations of the AKS, knowing submission of a false or fraudulent claim, employment of an excluded individual, and the provision or offer of anything of value to a Medicare or Medicaid beneficiary that the transferring party knows or should know is likely to influence beneficiary selection of a particular provider for which payment may be made in whole or part by a federal health care program, commonly known as the Beneficiary Inducement CMP;

Health Insurance Portability and Accountability Act of 1996, as amended by the American Recovery and Reinvestment Act of 2009, and implementing regulations, or HIPAA, which created two new federal crimes:

health care fraud and false statements relating to health care matters.

The health care fraud statute prohibits knowingly and willfully executing a scheme to defraud any health care benefit program, including private payors.

A violation of this statute is a felony and may result in fines, imprisonment or exclusion from government sponsored programs.

The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services;

similar to the AKS, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

• analogous state and foreign laws and regulations relating to health care fraud and abuse, such as state anti-kickback and false claims laws, that may apply to sales or marketing arrangements and claims involving health care items or services reimbursed by non-governmental third-party payors, including private insurers.

Penalties for violating these laws can range from fines to criminal sanctions;

• the FCPA and other anti-corruption laws and regulations pertaining to our financial relationships and interactions with foreign government officials;

federal physician payment transparency requirements, sometimes referred to as the Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid or the Children’s Health Insurance Program to report to the Centers for Medicare & Medicaid Services, or CMS, information related to physician payments and other transfers of value to physicians and teaching hospitals (and, beginning in 2021, for transfers of value to other health care providers), as well as the ownership and investment interests of physicians and their immediate family members;

federal physician payment transparency requirements, sometimes referred to as the Sunshine Act, which requires manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid or the Children’s Health Insurance Program to track and annually report to the Centers for Medicare & Medicaid Services, or CMS, information related to certain payments and other transfers of value made to U.S.-licensed physicians (defined broadly to include doctors, dentists, optometrists, podiatrists, chiropractors, and certain advanced non-physician health care practitioners) and teaching hospitals.

Manufacturers are also required to report certain ownership and investment interests held by physicians and their immediate family members.

The law carries penalties of up to $1.15 million per year for violations, depending on the circumstances, and payments reported also have the potential to draw scrutiny on payments to and relationships with physicians, which may have implications under the AKS and other healthcare laws;

• analogous state and foreign laws that require pharmaceutical companies to track, report and disclose to the government and/or the public information related to payments, gifts, and other transfers of value or remuneration to physicians and other health care providers, marketing activities or expenditures, or product pricing or transparency information, or that require pharmaceutical companies to implement compliance programs that meet certain standards or to restrict or limit interactions between pharmaceutical manufacturers and members of the health care industry;

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• HIPAA, which imposes obligations on certain covered entity health care providers, health plans, and health care clearinghouses as well as their business associates that perform certain services involving the use or disclosure of individually identifiable health information, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

• 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.

laws, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

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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The contemplated amendment relates to revised commercial terms.

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

We recorded the probable expected impact of the amendment in research and development expense in 2019, although the final expense could be different than what we currently have recorded.

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.

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.

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 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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In addition to the TUM License and the PD-1 In-License, we have other in-license agreements and may seek to enter into additional agreements with other third parties in the future granting similar license rights with respect to other potential drug candidates.

If we fail to comply with any of the conditions or obligations or otherwise breach the terms of the TUM License or the PD-1 In-License, the Kelun Agreement or any future license agreement we may enter on which our business or drug candidates are dependent, TUM, Enumeral, Kelun or other licensors may have the right to terminate the applicable agreement in whole or in part and thereby extinguish our rights to the licensed technology and intellectual property and/or any rights we have acquired to develop and commercialize certain drug candidates, including, with respect to the TUM License and PD-1 In-License, our Anticalin drug therapies.

If we fail to comply with any of the conditions or obligations or otherwise breach the terms of the TUM License, the PD-1 In-License, the Kelun Agreement or any future license agreement we may enter on which our business or drug candidates are dependent, TUM, Enumeral, Kelun or other licensors may have the right to terminate the applicable agreement in whole or in part and thereby extinguish our rights to the licensed technology and intellectual property and/or any rights we have acquired to develop and commercialize certain drug candidates, including, with respect to the TUM License and PD-1 In-License, our Anticalin-based drug therapies.

Under the TUM License, we can terminate the licenses to any or all licensed patents upon specified advance notice to TUM.

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Enumeral may terminate the PD-1 In-License only upon a material breach by us that is not cured.

The loss of the rights licensed to us under our license agreement with TUM or Enumeral, or any future license agreement that we may enter granting us rights on which our business or drug candidates are dependent, would eliminate our ability to further develop the applicable drug candidates and would materially harm our business, prospects, financial condition and results of operations.

The loss of the rights licensed to us under our license agreement with TUM or Enumeral, or any future license agreement that we may enter granting us rights on which our business or drug candidates are dependent, would eliminate our ability to further develop the applicable drug candidates and may materially harm our business, prospects, financial condition and results of operations.

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.

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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

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.

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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In addition to the protection afforded by patents, we seek to rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable, processes for which patents are difficult to enforce and any other elements of our discovery platform and drug development processes that involve proprietary know-how, information or technology that is not covered by patents or not amenable to patent protection.

Although we require all of our employees and certain consultants and advisors to assign inventions to us, and require all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information or technology to enter into confidentiality agreements, our trade secrets and other proprietary information may be disclosed or competitors may otherwise gain access to such information or independently develop or reverse engineer substantially equivalent information.

Although we require all of our employees and certain consultants, third-parties and advisors to assign inventions to us, and require all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information or technology to enter into confidentiality agreements, our trade secrets and other proprietary information may be disclosed or competitors may otherwise gain access to such information or independently develop or reverse engineer substantially equivalent information.

Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States.

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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.

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.

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.

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

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To attempt to stop infringement or unauthorized use, we may need to enforce one or more of our patents, which can distract our management and divert our limited time and resources.

Our standing to enforce such patents may sometimes be dependent on the licensor joining such suit, and a licensor's failure to join such suit may prevent us from enforcing the patent.

If we pursue any litigation, a court may decide that a patent of ours or any of our licensors’ is not valid or is unenforceable or may refuse to stop the other party from using the relevant technology on the grounds that our patents do not cover the technology in question.

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If we become involved in any dispute regarding our trademark rights, regardless of whether we prevail, we could be required to engage in costly, distracting and time-consuming litigation that could harm our business.

If the trademarks we use are found to infringe upon the trademark of another company, we could be liable for damages and be forced to stop using those trademarks, and as result, we could lose all the goodwill that has been developed in those trademarks.

If the trademarks we use are found to infringe upon the trademark of another company, we could be liable for damages and be forced to stop using those trademarks, and as result, we could lose all of the goodwill that has been developed in those trademarks.

The future growth of our business may expose our intellectual property to a high risk of counterfeiting or unauthorized use.

As part of our business strategy, we intend to license our Anticalin technology and sell our potential products, if any, in many different countries.

As part of our business strategy, we intend to license our Anticalin-based technology and sell our potential products, if any, in many different countries.

As a result, we may do business with third parties in countries where intellectual property rights have been or are routinely disregarded, and the future growth of our business may expose our intellectual property to a high risk of counterfeiting or unauthorized use.

Although we attempt to obtain broad international intellectual property rights for our Anticalin technology and proteins, we cannot guarantee that such rights, to the extent we can obtain them, will be enforceable in a timely fashion or at all in any particular country or jurisdiction, or that if enforced, will offer us adequate commercial protection or adequate redress for any harm suffered.

Counterfeiting or unauthorized use of our technologies or products may also expose our business to harm for which no adequate monetary redress exists, and to the extent we are unable to stop such use, may cause us to lose rights with respect to intellectual property that is crucial to our business.

Counterfeiting or unauthorized use of our technologies or products may

also expose our business to harm for which no adequate monetary redress exists, and to the extent we are unable to stop such use, may cause us to lose rights with respect to intellectual property that is crucial to our business.

Any such misuse of our intellectual property may have a substantial negative impact on our business and revenues and may cause our business to fail.

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Our relations between German employers and employees are extensively regulated under German labor and employment laws and regulations.

German employees have special protection against dismissals provided the employee has been employed by a company for more than six months and such company employs more than 10 employees.

Employment relationships may be terminated for cause without observing the ordinary notice period.

If terminated without cause, the applicable ordinary notice period must be observed .

German employees have special protection against dismissals provided the employee has been employed by a company for more than six months and such company employs more than 10 full-time employees.

German employment termination law is regulated by various codes, in particular the Kündigungsschutzgesetz, or the German Termination Protection Act, and is intended to give the employee maximum protection against unfair dismissal, including among other things:

• the employer must observe the applicable notice period, which is ordinarily determined by law (between four weeks and seven months, depending upon the length of employment), if a longer period is not otherwise agreed by the parties, and has to deliver a written notice of termination to the employee;

• 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;

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.

• the employer must observe the applicable notice period, which is ordinarily determined by law (between four weeks and seven months, depending upon the length of employment, though it is possible for the notice period to be two weeks, if a probationary period, lasting up to the first six months of employment, is agreed upon), if a longer period is not otherwise agreed by the parties, and has to deliver a written notice of termination to the employee;

• for companies with more than 10 full-time 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 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 30 calendar day period, prior written notification to the German employment office is required.

In this regard, if we downsize for any reason and fail to adhere to the complex requirements articulated by the employee protection law, we could face legal actions brought by affected employees or former employees, and, as a result, we may incur operational or financial losses and divert the attention of our executive officers from managing our business.

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In those cases where employees have not assigned their interests to us, we may need to pay compensation for the use of those patents.

If we are required to pay additional compensation or face other disputes under the German Act on Employees’ Inventions, our results of operations could be adversely affected.

required to pay additional compensation or face other disputes under the German Act on Employees’ Inventions, our results of operations could be adversely affected.

Risks Related to the Ownership of Our Common Stock

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Broad market and industry factors may negatively affect the market price of our common stock, regardless of our actual operating performance.

Furthermore, other biotechnology companies or our competitors’ programs could have positive or negative results that impact their stock prices and their results or stock fluctuations could have a positive or negative impact on our stock price regardless of whether such impact is direct or not.

on our stock price regardless of whether such impact is direct or not.

The realization of any of the above risks or any of a broad range of other risks, including those described in these “Risk Factors,” could have a dramatic and material adverse impact on the market price of our common stock.

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.

Our management has considerable discretion in the application of our cash, cash equivalents and marketable securities, including the fees and milestone payments from our collaborations and the net proceeds of our securities offerings.

We intend to use the cash, cash equivalents and marketable securities to advance our product candidates and for working capital and other general corporate purposes, which will include the hiring of additional personnel and capital expenditures.

As a result, investors will be relying upon management’s judgment with only limited information about our specific intentions for the use of the cash, cash equivalents and marketable securities.

We may use the cash, cash equivalents and marketable securities for purposes that do not yield a significant return or any return at all for our stockholders.

We have broad discretion in how we use our cash, cash equivalents and investments, 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.

Our management has considerable discretion in the application of our cash, cash equivalents and investments, including the fees and milestone payments from our collaborations and the net proceeds of our securities offerings.

We intend to use the cash, cash equivalents and investments to advance our product candidates and for working capital and other general corporate purposes, which will include the hiring of additional personnel and capital expenditures.

As a result, investors will be relying upon management’s judgment with only limited information about our specific intentions for the use of the cash, cash equivalents and investments.

We may use the cash, cash equivalents and investments for purposes that do not yield a significant return or any return at all for our stockholders.

In addition, pending their use, we may invest the financial resources from our collaborations and securities offerings in a manner that does not produce income or that loses value.

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If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and any trading volume to decline.

As of December 31, 2020, we had six analysts covering our stock.

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

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

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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.

However, while we remain 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.

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.

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.

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.

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

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.

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 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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Shares of our common stock that have not been registered under federal securities laws are subject to resale restrictions imposed by Rule 144 of the Securities Act, including those set forth in Rule 144(i) which apply to a former “shell company.”

Prior to the closing of the Acquisition, we were deemed a “shell company” under applicable SEC rules and regulations because we had no or nominal operations and either no or nominal assets, assets consisting solely of cash and cash equivalents, or assets consisting of any amount of cash and cash equivalents and nominal other assets.

We were previously deemed a “shell company” under applicable SEC rules and regulations, prior to the reverse merger transaction in which we became a public company, because we had no or nominal operations and either no or nominal assets, assets consisting solely of cash and cash equivalents, or assets consisting of any amount of cash and cash equivalents and nominal other assets.

Pursuant to Rule 144 of the Securities Act, sales of the securities of a former shell company, such as us, are not permitted unless at the time of a proposed sale, (i) we are subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;

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The sale, or availability for sale, of our common stock in the public market may adversely affect the prevailing market price of our common stock and may impair our ability to raise additional equity capital.

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 March 2021, we registered for resale 3,706,174 shares of common stock in connection with a private placement transaction with Seagen, and 3,584,320 shares of common stock in connection with a private placement transaction with AstraZeneca.

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.

Furthermore, because there are a large number of shares registered pursuant to the resale registration statements, we may continue to offer shares covered by the resale registration statements for a significant period of time, the precise duration of which cannot be predicted.

Accordingly, the adverse market and price pressures resulting from an offering pursuant to the resale registration statement may continue for an extended period of time and continued negative pressure on the market price of our common stock could have a material adverse effect on our ability to raise additional equity capital.

Accordingly, the adverse market and price pressures resulting from an

offering pursuant to the resale registration statement may continue for an extended period of time and continued negative pressure on the market price of our common stock could have a material adverse effect on our ability to raise additional equity capital.

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.

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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 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.

As of December 31, 2021, there were 3,282,399 shares reserved for future issuance under our equity compensation plans, and 12,211,713 shares reserved for issuance upon the exercise of outstanding equity awards.

Pursuant to our 2018 Employee Stock Purchase Plan, we are authorized to sell 500,000 shares to our employees.

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As a result, our stockholders may be limited in their ability to obtain a premium for their shares.

See “Description of Capital Stock.”

We may incur significant costs from class action litigation due to our expected stock volatility.

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When the market price of a stock has been volatile as our stock price may be, holders of that stock have occasionally brought securities class action litigation against the company that issued the stock.

If any of our stockholders were to bring a lawsuit of this type against us, even if the lawsuit is without merit, could result in substantial costs defending the lawsuit and diversion of the time, attention and resources of our Board of Directors and management, which could significantly harm our profitability and reputation.

If any of our stockholders were to bring a lawsuit of this type against us, even if the lawsuit is without merit, could result in substantial costs

defending the lawsuit and diversion of the time, attention and resources of our Board of Directors and management, which could significantly harm our profitability and reputation.

Our Amended and Restated Articles of Incorporation designates the Eighth Judicial District Court of Clark County, Nevada, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, and therefore limit our stockholders’ ability to choose a forum for disputes with us or our directors, officers, employees or 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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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.

In May 2021, we entered into another 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 E 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.

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Having availed ourselves of scaled disclosure available to smaller reporting companies, we cannot be certain if such reduced disclosure will make our common stock less attractive to investors.

Under Rule 12b-2 of the Exchange Act, a “smaller reporting company” is a company that is not an investment company, an asset-backed issuer or a majority-owned subsidiary of a parent company that is not a smaller reporting company, and, according to the amended definition effective September 10, 2018, had a public float of less than $250 million as of the last business day of its most recently completed second fiscal quarter or, if such public float is less than $700 million, had annual revenues of less than $100 million during the most recently completed fiscal year.

Under Rule 12b-2 of the Exchange Act, a “smaller reporting company” is a company that is not an investment company, an asset-backed issuer or a majority-owned subsidiary of a parent company that is not a smaller reporting company, and had a public float of less than $250 million as of the last business day of its most recently completed second fiscal quarter or, if such public float is less than $700 million, had annual revenues of less than $100 million during the most recently completed fiscal year.

Smaller reporting companies are permitted to provide simplified executive compensation disclosure in their filings;

2 unchanged sentences

For as long as we continue to be a smaller reporting company, we expect that we will take advantage of the reduced disclosure obligations available to us as a result of those respective classifications.

Decreased disclosure in our SEC filings as a result of our having availed ourselves of scaled disclosure may make it harder for investors to analyze our results of operations and financial prospects.

Decreased disclosure in our SEC filings as a result of our having

availed ourselves of scaled disclosure may make it harder for investors to analyze our results of operations and financial prospects.

UNRESOLVED STAFF COMMENTS

1 unchanged sentence

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

What changed 10-K

Item 1A. Risk Factors