Rani Therapeutics Holdings, Inc. 10-Q

10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ Commission File Number: 001-40672 RANI THERAPEUTICS HOLDINGS, INC. (Exact Name of Registrant as Specified in its Charter) Delaware 86-3114789 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 2051 Ringwood Avenue San Jose , California 95131 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: ( 408 ) 457-3700 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Class A common stock, par value $0.0001 per share RANI The Nasdaq Stock Market LLC Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of November 12, 2021, the registrant had 19,711,874 sh ares of Class A common stock, $0.0001 par value per share, outstanding, and 29,290,391 shares of Class B common stock, $0.0001 par value per share, outstanding and no shares of Class C common stock, $0.0001 par value per share, outstanding. Certain holder s of units of our consolidated subsidiary, Rani Therapeutics, LLC who do not hold shares of our Class B common stock can exchange their units for 1,545,811 shares of our Class A common stock. Table of Contents Page Special Note Regarding Forward-Looking Statements 3 PART I. FINANCIAL INFORMATION RANI THERAPEUTICS HOLDINGS, INC. Item 1. Financial Statements (Unaudited) 5 Condensed Consolidated Balance Sheets 5 Condensed Consolidated Statements of Operations and Comprehensive Loss 6 Condensed Consolidated Statements of Changes in Stockholders’ Equity / Convertible Preferred Units and Members' Deficit 7 Condensed Consolidated Statements of Cash Flows 8 Notes to Unaudited Condensed Consolidated Financial Statements 9 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 27 Item 3. Quantitative and Qualitative Disclosures About Market Risk 39 Item 4. Controls and Procedures 39 PART II. OTHER INFORMATION 40 Item 1. Legal Proceedings 40 Item 1A. Risk Factors 40 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 95 Item 3. Defaults Upon Senior Securities 96 Item 4. Mine Safety Disclosures 96 Item 5. Other Information 96 Item 6. Exhibits 97 Signatures 98 2 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q, including the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and consolidated financial position, business strategy, product candidates, planned preclinical studies and clinical trials, results of clinical trials, research and development costs, manufacturing costs, regulatory approvals, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that are in some cases beyond our control and may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “believe,” “estimate,” “predict,” “potential,” “seek,” “aim,” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about: • the progress and focus of our current and future clinical trials in the United States and abroad, and the reporting of data from those trials; • our ability to advance product candidates into and successfully complete clinical trials; • the beneficial characteristics, safety, efficacy, and therapeutic effects of our product candidates; • our potential and ability to successfully manufacture and supply our product candidates for clinical trials and for commercial use, if approved; • our ability to redesign and conduct additional preclinical and clinical studies of any future design of the RaniPill capsule to accommodate target payloads that are larger than the current capacity of the RaniPill capsule; • our ability to further develop and expand our platform technology; • our ability to utilize our technology platform to generate and advance additional product candidates; • the accuracy of our estimates regarding expenses, future revenue, capital requirements, and needs for additional financing; • our financial performance; • our plans relating to commercializing our product candidates, if approved; • our ability to selectively enter into strategic partnership and the expected potential benefits thereof; • the implementation of our strategic plans for our business and product candidates; • our ability to continue to scale and optimize our manufacturing processes by expanding our use of automation; • our estimates of the number of patients in the United States who suffer from the indications we target and the number of patients that will enroll in our clinical trials; • the size of the market opportunity for our product candidates in each of the indications we target; • our ability to continue to innovate and expand our intellectual property by developing novel formulations and new applications of the RaniPill capsule; 3 • our plans and ability to obtain or protect intellectual property rights, including extensions of existing patent terms where available; • the scope of protection we are able to establish and maintain for intellectual property rights, including our technology platform and product candidates; • the sufficiency of our existing cash and cash equivalents to fund our future operating expenses and capital expenditure requirements; • our expectations regarding the impact of the COVID-19 pandemic on our business; • developments relating to our competitors and our industry, including competing product candidates and therapies; and • our expectations regarding the period during which we will qualify as an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations, and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties, and assumptions described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, or otherwise. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements. 4 RANI THERAPEUTICS HOLDINGS, INC. CONDENSED CONSOLIDA TED BALANCE SHEETS (in thousands, except par value) September 30, December 31, 2021 2020 (Unaudited) Assets Current assets: Cash and cash equivalents $ 129,743 $ 73,058 Related party note receivable — 1,720 Prepaid expenses 2,622 167 Total current assets 132,365 74,945 Property and equipment, net 4,593 4,470 Total assets $ 136,958 $ 79,415 Liabilities, Convertible Preferred Units and Stockholders' Equity / Members’ Deficit Current liabilities: Accounts payable $ 1,311 $ 537 Related party payable 290 145 Accrued expenses 3,649 550 Deferred revenue — 2,717 Current portion of long-term debt — 1,359 Total current liabilities 5,250 5,308 Preferred unit warrant liability — 320 Long-term debt, less current portion — 2,412 Total liabilities 5,250 8,040 Commitments and contingencies (Note 10) Convertible preferred units — 184,714 Stockholders' equity / members’ deficit: Common units — 664 Preferred stock, $ 0.0001 par value - 20,000 shares authorized; no ne issued and outstanding as of September 30, 2021 — — Class A common stock, $ 0.0001 par value - 800,000 shares authorized; 19,712 issued and outstanding as of September 30, 2021 2 — Class B common stock, $ 0.0001 par value - 40,000 shares authorized; 29,290 issued and outstanding as of September 30, 2021 3 — Class C common stock, $ 0.0001 par value - 20,000 shares authorized; no ne issued and outstanding as of September 30, 2021 — — Additional paid-in capital 54,503 — Accumulated deficit ( 3,142 ) ( 114,003 ) Total stockholders' equity attributable to Rani Therapeutics Holdings, Inc. / (members' deficit) 51,366 ( 113,339 ) Non-controlling interest 80,342 — Total stockholders' equity / (members' deficit) 131,708 ( 113,339 ) Total liabilities, convertible preferred units and stockholders' equity / (members' deficit) $ 136,958 $ 79,415 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 RANI THERAPEUTICS HOLDINGS, INC. CONDENSED Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share amounts) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Contract revenue $ — $ 108 $ 2,717 $ 252 Operating expenses Research and development 11,959 2,090 19,065 8,708 General and administrative 15,822 845 21,889 3,144 Total operating expenses $ 27,781 $ 2,935 $ 40,954 $ 11,852 Loss from operations ( 27,781 ) ( 2,827 ) ( 38,237 ) ( 11,600 ) Other income (expense), net Interest income 13 13 73 87 Loss on extinguishment of debt ( 700 ) — ( 700 ) — Interest expense and other, net ( 110 ) ( 64 ) ( 467 ) ( 66 ) Change in estimated fair value of preferred unit warrant ( 85 ) — ( 371 ) 655 Loss before income taxes ( 28,663 ) ( 2,878 ) ( 39,702 ) ( 10,924 ) Income tax expense ( 37 ) ( 5 ) ( 81 ) ( 23 ) Net loss and comprehensive loss $ ( 28,700 ) $ ( 2,883 ) $ ( 39,783 ) $ ( 10,947 ) Net loss attributable to non-controlling interest ( 25,558 ) ( 2,883 ) ( 36,641 ) ( 10,947 ) Net loss attributable to Rani Therapeutics Holdings, Inc. $ ( 3,142 ) $ — $ ( 3,142 ) $ — Net loss per Class A common share attributable to Rani Therapeutics Holdings, Inc., basic and diluted $ ( 0.16 ) $ ( 0.16 ) Weighted-average Class A common shares outstanding—basic and diluted 19,437 19,437 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 6 RANI THERAPEUTICS HOLDINGS, INC. CONDENSED Consolidated Statements of Changes in STOCKHOLDERS’ Equity/CONVERTIBLE PREFERRED UNITS AND MEMBERS' Deficit (in thousands) (Unaudited) Class A Common Stock Class B Common Stock For the Nine Months Ended September 30, 2021 Convertible Preferred Units Members’ Deficit Shares Amount Shares Amount Additional Paid In Capital Accumulated Deficit Non-Controlling Interest Total Stockholders' Equity/Members' (Deficit) Activity prior to initial public offering ("IPO") and related Organizational Transactions Balance at December 31, 2020 $ 184,714 $ ( 113,339 ) — $ — — $ — $ — $ — $ — $ ( 113,339 ) Issuance of Series E preferred units 6,320 — — — — — — — — — Exercise of warrant for common units — 13 — — — — — — — 13 Equity-based compensation from secondary sales transactions — 453 — — — — — — — 453 Net loss — ( 5,598 ) — — — — — — — ( 5,598 ) Balance at March 31, 2021 $ 191,034 $ ( 118,471 ) — $ — — $ — $ — $ — $ — $ ( 118,471 ) Equity-based compensation — 282 — — — — — — — 282 Net loss — ( 5,485 ) — — — — — — — ( 5,485 ) Balance at June 30, 2021 $ 191,034 $ ( 123,674 ) — $ — — $ — $ — $ — $ — $ ( 123,674 ) Equity-based compensation — 17,042 — — — — — — — 17,042 Exercise of warrant for common units — 13 — — — — — — — 13 Settlement of preferred unit warrant liability 691 — — — — — — — — — Net loss — ( 20,644 ) — — — — — — — ( 20,644 ) Effects of the IPO and related Organizational Transactions Effects of Organizational Transactions ( 191,725 ) 127,263 12,048 1 29,290 3 18,106 — 46,352 191,725 Issuance of Class A common stock in connection with the IPO, net of issuance costs of $ 10,686 — — 7,667 1 — — 73,647 — — 73,648 Non-controlling interest adjustment for purchase of newly issued Class A units of Rani LLC with proceeds from the IPO — — — — — — ( 37,895 ) — 37,895 — Net loss — — — — — — — ( 149 ) ( 233 ) ( 382 ) Activity subsequent to the IPO and related Organizational Transactions Equity-based compensation — — — — — — 646 — 1,010 1,656 Forfeiture of restricted stock awards — — ( 3 ) — — — ( 1 ) — ( 1 ) ( 2 ) Net loss — — — — — — — ( 2,993 ) ( 4,681 ) ( 7,674 ) Balance at September 30, 2021 $ — $ — 19,712 $ 2 29,290 $ 3 $ 54,503 $ ( 3,142 ) $ 80,342 $ 131,708 Convertible Preferred Common For the Nine Months Ended September 30, 2020 Units Amount Units Amount Accumulated Deficit Total Members’ Deficit Balance at December 31, 2019 17,085 $ 115,505 46,890 $ 664 $ ( 97,300 ) $ ( 96,636 ) Net loss — — — — ( 5,350 ) ( 5,350 ) Balance at March 31, 2020 17,085 $ 115,505 46,890 $ 664 $ ( 102,650 ) $ ( 101,986 ) Net loss — — — — ( 2,714 ) ( 2,714 ) Balance at June 30, 2020 17,085 $ 115,505 46,890 $ 664 $ ( 105,364 ) $ ( 104,700 ) Net loss — — — — ( 2,883 ) ( 2,883 ) Balance at September 30, 2020 17,085 $ 115,505 46,890 $ 664 $ ( 108,247 ) $ ( 107,583 ) The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 7 RANI THERAPEUTICS HOLDINGS, INC. CONDENSED CONSOLIDATED STATEME NTS OF CASH FLOWS (in thousands) (Unaudited) Nine Months Ended September 30, 2021 2020 Cash flows from operating activities Net loss $ ( 39,783 ) $ ( 10,947 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 384 447 Equity-based compensation expense 19,431 — Change in fair value of preferred unit warrant liability 371 ( 655 ) Loss on extinguishment of debt 700 — Other 108 67 Changes in operating assets and liabilities: Prepaid expenses and other assets ( 2,455 ) ( 35 ) Related party receivable — 51 Accounts payable 674 1,924 Accrued expenses 2,346 ( 259 ) Related party payable 145 ( 1,601 ) Deferred revenue ( 2,717 ) 2,748 Net cash used in operating activities ( 20,796 ) ( 8,260 ) Cash flows from investing activities Purchases of property and equipment ( 235 ) ( 944 ) Net cash used in investing activities ( 235 ) ( 944 ) Cash flows from financing activities Proceeds from issuance of Class A common stock sold in the IPO, net of issuance costs 74,218 — Proceeds from issuance of preferred units, net of issuance costs 6,320 — Proceeds from exercise of warrants for common units 26 — Proceeds from the Paycheck Protection Program Loan — 1,254 Repayment of the Paycheck Protection Program Loan ( 1,254 ) — Proceeds from issuance of convertible note, net of issuance costs — 2,781 Repayment of convertible note ( 3,314 ) — Principal and interest repayments from related party for note receivable 1,720 — Net cash provided by financing activities 77,716 4,035 Net increase (decrease) in cash and cash equivalents 56,685 ( 5,169 ) Cash and cash equivalents, beginning of period 73,058 16,536 Cash and cash equivalents, end of period $ 129,743 $ 11,367 Supplemental disclosures of cash flow information Cash paid for interest $ 285 $ — Supplemental disclosures of non-cash investing and financing activities Property and equipment purchases included in accounts payable and accrued expenses $ 284 $ 402 IPO issuance costs included in accrued expenses $ 570 $ — Settlement of preferred unit warrant liability $ 691 $ — Exchange of Class A Units of Rani LLC from the Former LLC Owners $ 132,527 $ — The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 8 RANI THERAPEUTICS HOLDINGS, INC. Notes to T HE UNAUDITED CONDENSED Consolidated Financial Statements 1. Organization and Nature of Business Description of Business Rani Therapeutics Holdings, Inc. (the "Company") was formed as a Delaware corporation in April 2021 for the purpose of facilitating an initial public offering ("IPO") of its Class A common stock, facilitate certain organizational transactions and to operate the business of Rani Therapeutics, LLC (“Rani LLC”) and its consolidated subsidiary. The Company is a clinical stage biotherapeutics company focusing on advancing technologies to enable the development of orally administered biologics. The Company has developed the RaniPill capsule, which is a novel, proprietary and patented platform technology, intended to replace subcutaneous or intravenous injection of biologics with oral dosing. The Company is headquartered in San Jose, California and operates in one segment. Up to December 31, 2019, Rani LLC maintained no employees of its own and contracted InCube Labs, LLC (“ICL”), the majority common unit holder of Rani LLC and a related party, to provide research, development and administrative services. ICL and Rani LLC have common management and interest holders and, in the course of performing under the terms of the service agreements, ICL employees acted on behalf of Rani LLC. Effective January 1, 2020, the ICL personnel that were substantially dedicated to providing services to Rani LLC were hired by Rani Management Services, Inc. ("RMS") as full-time employees (Note 6). Initial Public Offering and Organizational Transactions In August 2021, the Company closed its initial public offering (“the Offering” or “IPO”) and sold 7,666,667 shares of its Class A common stock, including shares issued pursuant to the exercise in full of the underwriters’ option, for cash consideration of $ 11.00 per share and received approximately $ 73.6 million in net proceeds, after deducting underwriting discounts, offering costs and commissions. The Company used the proceeds from the IPO to purchase 7,666,667 newly issued economic nonvoting Class A units (“Class A Units”) of Rani LLC. In connection with the IPO, the Company was party to the following organizational transactions (the “Organizational Transactions”):  Amended and restated Rani LLC’s operating agreement (the “Rani LLC Agreement”) to appoint the Company as the sole managing member of Rani LLC and effectuated an exchange of all outstanding (i) convertible preferred units, automatic or net exercised warrants to purchase preferred units and common units, and common units of Rani LLC, into Class A Units and an equal number of voting noneconomic Class B units (“Class B Units”) and (ii) all Profits Interests into Class A Units. In connection with the closing of the IPO, each LLC interest was exchanged 1 for 0.5282 as determined and predicated on the initial public offering price of the Company’s Class A common stock.  Amended and restated the Company’s certificate of incorporation in July 2021, to provide for the issuance of (i) Class A common stock, each share of which entitles its holders to one vote per share , (ii) Class B common stock, each share of which entitles its holders to 10 votes per share on all matters presented to the Company's stockholders , (iii) Class C common stock, which has no voting rights, except as otherwise required by law and (iv) preferred stock;  Exchanged 12,047,925 shares of Class A common stock for existing Class A Units of Rani LLC held by certain individuals and entities (the “Former LLC Owners”) on a one-for-one basis;  Issued 29,290,391 shares of Class B common stock to the certain individuals and entities that continued to hold Class A Units in Rani LLC after the IPO (the “Continuing LLC Owners”) in return for an equal amount of Rani LLC Class B Units;  Entered into a registration rights agreement with certain of the Continuing LLC Owners. The Continuing LLC Owners are entitled to exchange, subject to the terms of the Rani LLC Agreement, the Class A Units they hold in Rani LLC, together with the shares they hold of the Company Class B common stock (together referred to as a "Paired Interest"), in return for shares of the Company’s Class A common stock on a one-for-one basis provided that, at the Company’s election, the Company may effect a direct exchange of such Class A common stock or make a cash payment equal to a volume weighted average market price of one share of Class A common stock for each Paired Interest redeemed. Any shares of Class B common stock will be cancelled on a one-for-one basis if the Company, at the election of the Continuing LLC Owners, redeems or exchanges such Paired Interest pursuant to the terms of the Rani LLC Agreement. These exchanges and redemptions may result in increases in the tax basis of the assets of Rani LLC that otherwise would not have been available. Increases in tax basis resulting from 9 such exchanges may reduce the amount of tax that the Company would otherwise be required to pay in the future. This tax basis may also decrease the gains (or increase the losses) on future dispositions of certain assets to the extent tax basis is allocated to those assets. Certain individuals who continue to own interests in Rani LLC but do not hold shares of the Company’s Class B common stock can exchange their Class A Units for 1,545,811 shares of the Company’s Class A common stock. Liquidity The Company has incurred recurring losses since its inception, including net losses of $ 39.8 million for the nine months ended September 30, 2021, of which $3.1 million was attributable to Rani Therapeutics Holdings, Inc. for the nine months ended September 30, 2021. As of September 30, 2021, the Company had an accumulated deficit of $3.1 million and for the nine months ended September 30, 2021 had negative cash flows from operations of $ 20.8 million. The Company expects to continue to generate operating losses and negative operating cash flows for the foreseeable future as it continues to develop the RaniPill capsule. The Company expects that its cash and cash equivalents of $ 129.7 million as of September 30, 2021 will be sufficient to fund its operations through at least one year from the date the condensed consolidated financial statements are issued. The Company expects to finance its future operations with its existing cash and through strategic financing opportunities that could include, but are not limited to, future offerings of its equity, collaboration or licensing agreements, or the incurrence of debt. However, there is no guarantee that any of these strategic or financing opportunities will be executed or realized on favorable terms, if at all, and some could be dilutive to existing stockholders and holders of interests in the Company. The Company will not generate any revenue from product sales unless, and until, it successfully completes clinical development and obtains regulatory approval for the RaniPill capsule. If the Company obtains regulatory approval for the RaniPill capsule, it expects to incur significant expenses related to developing its internal commercialization capability to support manufacturing, product sales, marketing, and distribution. The Company’s ability to raise additional capital through either the issuance of equity or debt, is dependent on a number of factors including, but not limited to, the demand for the Company, which itself is subject to a number of development and business risks and uncertainties, as well as the uncertainty that the Company would be able to raise such additional capital at a price or on terms that are favorable to the Company. 2. Summary of Significant Accounting Policies Basis of Presentation These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company operates and controls all of the business and affairs of Rani LLC, and through Rani LLC and its subsidiary, conducts its business. Because the Company manages and operates the business and controls the strategic decisions and day-to-day operations of Rani LLC and also has a substantial financial interest in Rani LLC, the Company consolidates the financial results of Rani LLC, and a portion of its net loss is allocated to the non-controlling interests in Rani LLC held by the Continuing LLC Owners. All intercompany accounts and transactions have been eliminated in consolidation. The Organizational Transactions were considered transactions between entities under common control. As a result, the condensed consolidated financial statements for periods prior to the IPO and the Organizational Transactions have been adjusted to combine the previously separate entities for presentation purposes. Unaudited Interim Financial Information The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and pursuant to Form 10-Q of Regulation S-X of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These unaudited condensed consolidated financial statements include all adjustments necessary to fairly state the financial position and the results of our operations and cash flows for interim periods in accordance with U.S. GAAP. All such adjustments are of a normal, recurring nature. Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or for any future period. The consolidated balance sheet as of December 31, 2020 included herein was derived from the audited consolidated financial statements as of that date. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Therefore, these interim condensed financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in the Company's Registration Statement on Form S-1 (No. 333-257809) filed with the SEC. 10 Variable Interest Entities The Company consolidates all entities that it controls through a majority voting interest or as the primary beneficiary of a variable interest entity (“VIE”). In determining whether the Company is the primary beneficiary of an entity, the Company applies a qualitative approach that determines whether it has both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to that entity. The Company’s determination about whether it should consolidate such VIEs is made continuously as changes to existing relationships or future transactions may result in a consolidation event. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Estimates include, but are not limited to, revenue recognition, recovery of long-lived assets, equity-based compensation, accrued research and development costs and the fair value of Profits Interests and preferred unit warrants. Actual results may differ materially and adversely from these estimates. Revenue Recognition The Company enters into evaluation arrangements with certain pharmaceutical partners, under which the Company performs evaluation services of the partner’s drug molecules using the RaniPill capsule. Revenue is recognized when control of promised goods or services is transferred to a customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To determine revenue recognition for its arrangements with customers, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. Revenue for an individual contract is recognized at the related transaction price, which is the amount the Company expects to be entitled to in exchange for transferring these services. The terms of the evaluation services agreements usually include payments for evaluation services and evaluation milestones based on a decision to extend the agreement. The transaction price of the evaluation services contracts may include variable consideration. Application of the constraint for variable consideration requires judgment. The constraint for variable consideration is applied such that it is probable a significant reversal of revenue will not occur when the uncertainty associated with the contingency is resolved. Application of the constraint for variable consideration is updated at each reporting period as a revision to the estimated transaction price. For arrangements where the anticipated period between timing of transfer of services and the timing of payment is one year or less, the Company has elected to not assess whether a significant financing component exists. The Company recognizes evaluation services revenue over the period in which evaluation services are provided. Specifically, the Company recognizes revenue using an output method to measure progress, using samples processed relative to total expected samples to be processed as its measure of progress. For services under these arrangements, costs incurred are included in research and development expenses in the Company’s consolidated statements of operations and comprehensive loss. Customer options, such as options granted to allow a customer to acquire later stage evaluation services, are evaluated at contract inception in order to determine whether those options provide a material right (i.e., an optional good or service offered for free or at a discount) to the customer. If the customer options represent a material right, the material right is treated as a separate performance obligation at the outset of the arrangement. The Company allocates the transaction price to material rights based on the standalone selling price, and revenue is recognized when or as the future goods or services are transferred or when the option expires. Customer options that are not material rights do not give rise to a separate performance obligation, and as such, the additional consideration that would result from a customer exercising an option in the future is not included in the transaction price for the current contract. Instead, the option is deemed a marketing offer, and additional option fee payments are recognized or being recognized as revenue when the licensee exercises the option. The exercise of an option that does not represent a material right is treated as a separate contract for accounting purposes. Revenue is recognized for each distinct performance obligation as control is transferred to the customer. The Company recognizes revenue from its evaluation services over time as services are delivered, using a cost-based input method of revenue recognition over the contract term. The cost-based input measured is based on an estimate of total costs to be incurred to deliver the services over the contract period compared to costs incurred to date for each contract. The Company’s evaluation of estimated costs to perform the services typically includes estimates for effort related to contracted research, formulation, and animal testing. These 11 estimates are based on the Company’s reasonable assumptions and its historical experience. Actual results may differ materially and adversely from these estimates. Incremental costs of obtaining contracts are expensed when incurred when the amortization period of the assets that otherwise would have been recognized is one year or less. To date none of these costs have been material. The costs to fulfill the contracts are determined to be immaterial and are recognized as an expense when incurred. Contract assets are generated when contractual billing schedules differ from revenue recognition timing and the Company records a contract receivable when it has an unconditional right to consideration. No contract assets balance was recorded as of September 30, 2021 or December 31, 2020. Contract liabilities are recorded as deferred revenue when cash payments are received or due in advance of performance or where the Company has unsatisfied performance obligations. As of December 31, 2020 the Company had deferred revenue of $ 2.7 million. There was no deferred revenue as of September 30, 2021 . Concentrations of Credit Risk and Other Risks and Uncertainties Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains accounts in federally insured financial institutions in excess of federally insured limits. The Company also holds money market funds that are not federally insured. However, management believes the Company is not exposed to significant credit risk due to the financial strength of the depository institutions in which these deposits are held and of the money market funds and other entities in which these investments are made. In December 2019, a novel strain of coronavirus, which causes the disease known as COVID-19, was reported to have surfaced in Wuhan, China. Since then, COVID-19 coronavirus has spread globally. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. The COVID-19 pandemic has impacted and may continue to impact the Company’s third-party manufacturers and suppliers, which could disrupt its supply chain or the availability or cost of materials. The effects of the public health directives and the Company’s work-from-home policies may negatively impact productivity, disrupt its business, and delay clinical programs and timelines and future clinical trials, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on the Company’s ability to conduct business in the ordinary course. These and similar, and perhaps more severe, disruptions in the Company’s operations could negatively impact business, results of operations and financial condition, including its ability to obtain financing. To date, the Company has not incurred impairment losses in the carrying values of its assets as a result of the pandemic and is not aware of any specific related event or circumstances that would require the Company to revise its estimates reflected in these condensed consolidated financial statements. The Company cannot be certain what the overall impact of the COVID-19 pandemic will be on its business and prospects. The extent to which the COVID-19 pandemic will further directly or indirectly impact its business, results of operations, financial condition, and liquidity, including planned and future clinical trials and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19, the actions taken to contain or treat it, and the duration and intensity of the related effects. In addition, the Company could see some limitations on employee resources that would otherwise be focused on its operation, including but not limited to sickness of employees or their families, the desire of employees to avoid contact with large groups of people, and increased reliance on working from home. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s business, financial condition, results of operations and prospects may be adversely affected. Fair Value of Financial Instruments Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable: Level 1—Quoted prices in active markets for identical assets or liabilities. Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. 12 Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. The carrying values of the Company’s cash equivalents, prepaid expenses, accounts payable, and accruals approximate their fair value due to their short-term nature. The fair value of the Company’s long-term debt approximated its carrying value based on borrowing rates currently available to the Company for debt with similar terms and maturities (Level 2 inputs). To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgement exercised by the Company in determining fair value is greatest for instruments categorized in Level 3 (Note 3). A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value of the instrument. Research and Development Costs Research and development costs are expensed as incurred. Research and development expenses consist primarily of contract research fees and process development, outsourced labor and related expenses for personnel, facilities cost, fees paid to consultants and advisors, depreciation and supplies used in research and development and costs incurred under our evaluation agreements. Payments made prior to the receipt of goods or services to be used in research and development activities are recorded as prepaid expenses until the related goods or services are received. Until future commercialization is considered probable and the future economic benefit is expected to be realized the Company does not capitalize pre-launch inventory costs. Costs of property and equipment related to scaling-up of the manufacturing capacity for clinical trials and to support commercialization are capitalized as property and equipment unless the related asset does not have an alternative future use. Clinical and preclinical costs are a component of research and development expense. The Company accrues and expenses clinical and pre-clinical trial activities performed by third parties based upon actual work completed in accordance with agreements established with its service providers. The Company determines the actual costs through discussions with internal personnel and external service providers as to the progress or stage of completion of services and the agreed-upon fee to be paid for such services. Equity-Based Compensation Stock-Based Compensation In July 2021, the Company adopted and its stockholders approved, the Rani Therapeutics Holdings, Inc. 2021 Equity Incentive Plan (the “2021 Plan”). The Company has subsequently granted stock options to purchase shares of its Class A common stock as well as restricted stock units (“RSUs”) and restricted stock awards ("RSAs") from the 2021 Plan to both employees and non-employees. The Company measures stock-based compensation at fair value on the grant date of the award. The fair value of employee and nonemployee RSUs is determined based on the number of shares granted and the closing market price of the Company’s Class A common stock on the date of grant. The fair value of employee RSA's is determined based on the estimated fair value of the Company’s Class A common stock on the grant date and is subject to the Company's reacquisition right which is accounted for as a forfeiture provision (Note 9). For awards that vest subject to the satisfaction of service requirements, compensation expense is measured based on the fair value of the award on the date of grant and expense is recognized on a straight-line basis over the requisite service period. The Company accounts for forfeitures as they occur. Stock-based compensation is classified in the accompanying condensed consolidated statements of operations and comprehensive loss based on the function to which the related services are provided. The Company determines the grant-date fair value of options to purchase common shares using the Black-Scholes option-pricing model which requires inputs based on certain subjective assumptions, including the expected stock price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option, and the Company’s expected dividend yield . Such assumptions represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. If actual results are not consistent with the Company’s assumptions and judgments used in making these estimates, the Company may be required to increase or decrease compensation expense, which could be material to the Company’s consolidated results of operations. Unit-Based Compensation Prior to the IPO, Rani LLC had granted equity-based awards to employees, Board Managers and nonemployees, including ICL employees and consultants, in the form of non-vested incentive units (“Profits Interests”) and/or options to purchase common units. All awards of Profits Interests and options to purchase common units were measured based on the estimated fair value of the award on the date of grant. Forfeitures were recognized when they occurred. All of the Profits Interests were subject to service and performance-based conditions and the Company evaluated the probability of achieving each performance-based condition at each 13 reporting date and recognized equity-based compensation expense for employee and consultant awards and distributions of equity for ICL employee awards in the condensed consolidated financial statements when it was deemed probable that the performance-based condition would be met using the accelerated attribution method over the requisite service period. The options to purchase common units were subject to service conditions and generally vested over three or four years. The Company utilized estimates and assumptions in determining the fair value of its Profits Interests and options to purchase common units on the date of grant. The Company utilized various valuation methodologies in accordance with the framework of the American Institute of Certified Public Accountants Technical Practice Aid, Valuation of Privately Held Company Equity Securities Issued as Compensation , to estimate the fair value of its preferred units, common units and Profits Interests. Each valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates and assumptions include several objective and subjective factors, including probability weighting of events, volatility, time to an exit event, a risk-free interest rate, the prices at which the Company sold preferred units, the superior rights, and preferences of the preferred units senior to the Company’s common units at the time, and a discount for the lack of marketability. Changes to the key assumptions used in the valuations could result in different fair values at each valuation date. Tax Receivable Agreement In August 2021, in connection with the IPO and Organizational Transactions, the Company entered into a tax receivable agreement ("TRA") with certain of the Continuing LLC Owners. The TRA provides that the Company pay to such Continuing LLC Owners, 85 % of the amount of tax benefits, if any, it is deemed to realize (calculated using certain assumptions) as a result of (i) increases in the tax basis of assets of Rani LLC resulting from (a) any future redemptions or exchanges of Paired Interests and (b) payments under the TRA and (ii) certain other benefits arising from payments under the TRA (collectively the “Tax Attributes”). A liability for the payable to parties subject to the TRA, and a reduction to stockholders’ equity, is accrued when (i) an exchange of a Paired Interest has occurred and (ii) when it is deemed probable that the Tax Attributes associated with the exchange will be used to reduce the Company’s taxable income based on the contractual percentage of the benefit of Tax Attributes that the Company expects to receive over a period of time. No exchanges of Paired Interests had occurred through September 30, 2021 and therefore no liability had been accrued for the TRA. Comprehensive Loss Comprehensive loss is defined as a change in equity of a business enterprise during a period, resulting from transactions and other events and/or circumstances from non-owner sources. The Company did not have any other comprehensive loss for any of the periods presented, and therefore comprehensive loss was the same as the Company’s net loss. Net Loss Per Class A Common Share Attributable to Rani Therapeutics Holdings, Inc. Basic net loss per Class A common share attributable to Rani Therapeutics Holdings, Inc. is computed by dividing net loss attributable to the Company by the weighted average number of Class A Common shares outstanding during the period, without consideration of potential dilutive securities. Diluted net loss per Class A Common share is computed giving effect to all potentially dilutive shares. Diluted net loss per Class A Common share for all periods presented is the same as basic loss per share as the inclusion of potentially issuable shares would be antidilutive. Net loss per share is not presented for the three and nine months ended September 30, 2020 as the Company did not have any economic interests prior to the date of the IPO and Organizational Transactions through which it was given ownership in Rani LLC. Losses prior to the IPO and Organizational Transactions would have been allocated to the original members of Rani LLC. The basic and diluted net loss per Class A common share attributable to Rani Therapeutics Holdings, Inc. for the three and nine-months ended September 30, 2021 is applicable only for the period from August 4, 2021 to September 30, 2021, which is the period following the IPO and Organizational Transactions and represents the period that the Company had Class A common shares outstanding. Non-Controlling Interest Non-controlling interest ("NCI") represents the portion of income or loss, net assets and comprehensive loss of our consolidated subsidiary that is not allocable to the Company based on the Company's percentage of ownership of Rani LLC. In August 2021, based on the Organizational Transactions, the Company became the sole managing member of Rani LLC. As of September 30, 2021, the Company held approximately 39 % of the Class A Units of Rani LLC, and approximately 61 % of the outstanding Class A Units of Rani LLC are held by the Continuing LLC Owners. Therefore, the Company reports NCI based on the Class A Units of Rani LLC held by the Continuing LLC Owners on its condensed consolidated balance sheet as of September 30, 2021. Income or loss attributed to the NCI in Rani LLC is based on the Class A Units outstanding during the period for which the 14 income or loss is generated and is presented on the condensed consolidated statements of operations and comprehensive income or loss. Future exchanges of Paired Interests will result in a change in ownership and reduce or increase the amount recorded as NCI and increase or decrease additional paid-in-capital when Rani LLC has positive or negative net assets, respectively. From the date of the Organizational Transactions to September 30, 2021, there were no exchanges of Paired Interests. New Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-02, Leases (“Topic 842”), as subsequently amended, to improve financial reporting and disclosures about leasing transactions. Topic 842 requires companies that lease assets to recognize on the condensed consolidated balance sheet the assets and liabilities for the rights and obligations created by those leases, where the lease terms exceed 12 months. The recognition, measurement, and presentation of expense and cash flows arising from a lease by a lessee will depend primarily on its classification as a finance or operating lease; both types of leases will be recognized on the condensed consolidated balance sheet. Topic 842 also requires disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. On June 3, 2020, the FASB amended the effective dates of Topic 842 to give immediate relief from business disruptions caused by the COVID-19 pandemic and provided a one-year deferral of the effective date for nonpublic companies. As a result of the Company having elected the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act, and assuming the Company continues to be considered an emerging growth company, Topic 842 will be effective for the Company on January 1, 2022. The Company has not yet determined the effects of Topic 842 on its condensed consolidated financial statements but does expect the adoption of Topic 842 will have a material impact on the Company’s consolidated financial statements and related notes to the recognition of right of use (“ROU”) assets and lease liabilities on the Company’s consolidated balance sheets, but it will not have a material impact on the Company’s consolidated statement of income. The adoption of Topic 842 will also result in enhanced disclosures. In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (“ASU 2016-13”) to require the measurement of expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable forecasts. The main objective of this ASU is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. As a result of the Company having elected the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act, and assuming the Company continues to be considered an emerging growth company, ASU 2016-13 will be effective for the Company on January 1, 2023. The Company has not yet determined the potential effects of ASU 2016-13 on its condensed consolidated financial statements and disclosures. 3. Fair Value Measurements The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of inputs used in such measurements (in thousands): As of September 30, 2021 Level 1 Level 2 Level 3 Assets: Money market funds $ 126,363 $ — $ — Total assets $ 126,363 $ — $ — As of December 31, 2020 Level 1 Level 2 Level 3 Assets: Money market funds $ 71,666 $ — $ — Total assets $ 71,666 $ — $ — Liabilities: Preferred unit warrant liability $ — $ — $ 320 Total liabilities $ — $ — $ 320 There were no financial liabilities measured at fair value on a recurring basis as of September 30, 2021. The Company estimates the fair value of its money market funds by taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. 15 There were no transfers between Level 1, Level 2 and Level 3 of the fair value hierarchy for any of the periods presented. The Company held a Level 3 liability associated with preferred unit warrants that were issued in conjunction with a loan and security Agreement (Note 11). These preferred unit warrants were settled with Class A common stock as part of the IPO and Organizational Transactions (Note 7). The following tables set forth a summary of the changes in the fair value of the Company’s liability measured using Level 3 inputs (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Balance at beginning of period $ 606 $ — $ 320 $ 655 Change in estimated fair value of Series B warrants — — — 16 Change in estimated fair value of Series E warrants 85 — 371 — Expiration of Series B warrants — — — ( 671 ) Settlement of Series E warrants ( 691 ) ( 691 ) Balance at end of period $ — $ — $ — $ — 4. Accrued Expenses Accrued expenses consist of the following (in thousands): September 30, December 31, 2021 2020 Accrued professional fees $ 379 $ — Payroll and related 1,951 136 IPO issuance costs 570 — Other 749 414 Total accrued expenses $ 3,649 $ 550 5. Evaluation Agreements Takeda Takeda Pharmaceutical Company, Limited ("Takeda") was collaborating with the Company to conduct research on the use of the RaniPill capsule for the oral delivery of factor VIII (“FVIII”) therapy for patients with hemophilia A. The agreement granted Takeda a right of first negotiation to a worldwide, exclusive license under the Company’s intellectual property related to a FVIII-RaniPill therapeutic. Takeda paid the Company up-front payments of $ 5.9 million upon execution of and subsequent modifications to the agreement. Upon the initial evaluation services being completed, Takeda had an option to pay the Company $ 3.0 million to perform later stage evaluation services. Takeda also had the ability to terminate the agreement at any time by providing 30 days written notice after the effective date of the agreement. Unless terminated early, the agreement term ended upon the expiration of the right of first negotiation period which is 120 days after the completion of the evaluation services. The Takeda agreement could be terminated for cause by either party based on uncured material breach by the other party or bankruptcy of the other party. Upon early termination, all ongoing activities under the agreement and all mutual collaboration, development and commercialization licenses and sublicenses would terminate. The Company identified one material promise under the Takeda agreement, the obligation to perform services to evaluate if Takeda’s FVIII therapy can be orally delivered using the RaniPill capsule (“Research and Development Services”), which was concluded be a single performance obligation. For revenue recognition purposes, the Company determined that the duration of the contract began on the effective date in November 2017 and ends upon completion of the Research and Development Services. The contract duration is defined as the period in which parties to the contract have present enforceable rights and obligations. The Company also analyzed the impact of Takeda terminating the agreement prior to the completion of the performance obligation and determined, considering both quantitative and qualitative factors, that there were substantive non-monetary penalties to Takeda for doing so. 16 The Company has determined that the cost-based input method most faithfully depicts the transfer of its performance obligation to Takeda. Accordingly, the Company recognized its contract revenue based on actual costs incurred as a percentage of total estimated costs the Company expected to incur to deliver its performance obligation. These actual costs consisted of internal labor efforts, in vivo testing services and materials costs related to the Takeda agreement, as the costs incurred over time reflect the transfer of its performance obligations to Takeda. The cumulative effect of revisions to estimated costs to complete the Company’s performance obligation was recorded in the period in which changes were identified and amounts were reasonably estimable. In May 2021, the Company received written notice from Takeda as to their intent to terminate the contract for convenience. Due to the delivery of the termination notice, the Company determined that there were no further enforceable rights and obligations under the agreement beyond May 2021 and the remaining $ 2.0 million of deferred revenue was recognized during the nine months ended September 30, 2021 . For the three months ended September 30, 2021 , no contract revenue related to the Takeda agreement was recognized. For the three months ended September 30, 2020 , the Company recognized contract revenue related to the Takeda agreement of $ 0.1 million. For the nine months ended September 30, 2021 and 2020 , the Company recognized contract revenue related to the Takeda agreement of $ 2.7 million and $ 0.3 million, respectively. As of December 31, 2020 , deferred revenue related to the remaining identified performance obligation for the Takeda agreement of $ 2.7 million was recorded on the condensed consolidated balance sheets. There was no deferred revenue as of September 30, 2021. Changes in the deferred revenue balance are as follows (in thousands): September 30, December 31, 2021 2020 Balance at beginning of period $ 2,717 $ 179 Additions — 3,000 Deductions ( 2,717 ) ( 462 ) Balance at end of period $ — $ 2,717 There were no receivables or net contract assets recorded as of September 30, 2021 or December 31, 2020 associated with the Takeda agreement. The Company expensed all incremental costs of obtaining the Takeda agreements, as such amounts were insignificant. 6. Related Party Transactions ICL is wholly-owned by the Company’s founder and Executive Chairman and his family. The Company’s Chief Scientific Officer is the brother of the founder and Executive Chairman and uncle of the Company’s Chief Executive Officer. The founder and Executive Chairman is also the father of the Company’s Chief Executive Officer. Services agreements In January 2019, the Company, through its subsidiary, entered into a one year service agreement with ICL. This agreement was amended in January 2020 to extend the period for an additional year and expired in December 2020. The Company is presently operating under a service agreement with ICL executed in June 2021, retroactive to January 1, 2021. The Company or ICL may terminate services under the service agreement upon 60 days' notice to the other party, except for occupancy which requires six months' notice. The service agreement specifies the scope of services to be provided by ICL as well as the methods for determining the costs of services for the year ended December 31, 2021. Costs are billed on a monthly basis and based upon the hours incurred by ICL employees working on behalf of the Company as well as allocations of expenses based upon the Company’s utilization of ICL’s facilities and equipment. In June 2021, RMS entered into the RMS-ICL Service Agreement with ICL effective January 1, 2021 (the "RMS-ICL Service Agreement"), pursuant to which ICL agreed to rent a specified portion of its facility to RMS. Additionally, RMS and ICL agreed to provide personnel services to the other upon requests based on rates specified in the agreement. The RMS-ICL Service Agreement has a 12-month term and will automatically renew for successive 12-month periods unless terminated. For the nine months ended September 30, 2020 and 2021, RMS charged ICL $ 0.3 million and $ 0.5 million for services performed, respectively, and such amounts charged were recorded as a reduction to research and development expense in the condensed consolidated statement of operations and comprehensive loss. 17 The table below details the amounts charged by ICL for services and rent, net of the amount that RMS charged ICL, which is included in the condensed consolidated statements of operations and comprehensive loss (in thousa nds): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Research and development $ 222 $ ( 22 ) $ 377 $ 98 General and administrative 149 174 516 625 Total $ 371 $ 152 $ 893 $ 723 The Company’s eligible employees are permitted to participate in ICL’s 401(k) Plan (“401(k) Plan”). Participation in the 401(k) Plan is offered for the benefit of the employees, including the Company’s named executive officers, who satisfy certain eligibility requirements. As of September 30, 2021, all of the Company's facilities are owned by an entity affiliated with the Company’s Executive Chairman. The Company pays for the use of these facilities through the services agreement with ICL. Financing activity From inception to the first half of 2017, the Company advanced funds to ICL, and ICL made payments directly to certain vendors on behalf of Rani, Rani has reimbursed ICL for all such payments at cost on a monthly basis. In June 2017, the Company converted the outstanding net advances of $ 6.6 million to ICL into three notes receivable. The notes provide for interest at 1.97 % compounded annually, loan fees of 2.75 % and are payable upon demand to the Company any time after January 1, 2024. During 2020, the Company received $ 0.2 million in payments for interest and repayment of principal on the remaining notes receivable. As of December 31, 2020, $ 1.7 million of the notes receivable was outstanding. In March 2021, the outstanding balance due, including all accrued interest, was fully repaid by ICL. During 2020, the Company amended certain Series B warrants held by an entity affiliated with ICL. In December 2020, this entity elected to cashless exercise all of their Series B warrants in return for 51,341 Series B units (Note 7). This same entity also acquired 59,312 Series D units for $ 1.0 million in 2017. During 2020 and 2021, South Lake One LLC, a related party of the Company, and its Affiliates purchased 7,880,120 Series E Preferred Units of Rani LLC at $ 7.1471 per unit. As part of the Organizational Transactions the Series E Preferred Units were exchanged for 5,277,729 shares of the Company's Class A common stock. In connection with the IPO and subsequent thereto, South Lake One LLC and its Affiliates purchased an additional 6,458,904 shares of the Company’s Class A common stock for total gross proceeds of $ 71.1 million. Exclusive License, Intellectual Property and Common Unit Purchase Agreement The Company, through Rani LLC, and ICL entered into an exclusive license and an intellectual property agreement and common unit purchase agreement in 2012. Pursuant to the common unit purchase agreement, the Company issued 46.0 million common units to ICL in return for rights to exclusive commercialization, development, use and sale of certain products and services related to the RaniPill capsule technology. ICL also granted the Company a fully-paid, royalty-free, sublicensable, exclusive license under the intellectual property made by ICL during the course of providing services to the Company related to the RaniPill capsule technology. Such rights were not recorded on the Company’s condensed consolidated balance sheet as the transaction was considered a common control transaction. In June 2021, ICL and the Company, through Rani LLC, entered into an Amended and Restated Exclusive License Agreement which replaces the 2012 Exclusive License Agreement, as amended in 2013, and terminates the Intellectual Property Agreement, as amended in June 2013. Under the Amended and Restated License Agreement, the Company will have a fully paid, exclusive license under certain scheduled patents related to optional features of the device and certain other scheduled patents to exploit products covered by those patents in the field of oral delivery of sensors, small molecule drugs or biologic drugs including, any peptide, antibody, protein, cell therapy, gene therapy or vaccine. The Company will cover patent-related expenses and, after a certain period, the Company will have the right to acquire four specified U.S. patent families from ICL by making a one-time payment of $ 0.3 million to ICL for each U.S. patent family that the Company desires to acquire, up to $ 1.0 million in the aggregate. This payment will not become an obligation until the fifth anniversary of the Amended and Restated Exclusive License Agreement. The Amended and Restated Exclusive License Agreement will terminate when there are no remaining valid claims of the patents licensed under the 18 Amended and Restated Exclusive License Agreement. Additionally, the Company may terminate the Amended and Restated Exclusive License Agreement in its entirety or as to any particular licensed patent upon notification to ICL of such intent to terminate. Non-Exclusive License Agreement between Rani and ICL (“Non-Exclusive License Agreement”) In June 2021, the Company, through Rani LLC, entered into the Non-Exclusive License Agreement with ICL a related party, pursuant to which the Company granted ICL a non-exclusive, fully-paid license under specified patents that were assigned from ICL to the Company. Additionally, the Company agreed not to license these patents to a third party in a specific field outside the field of oral delivery of sensors, small molecule drugs or biologic drugs including, any peptide, antibody, protein, cell therapy, gene therapy or vaccine, if ICL can prove that it or its sublicensee has been in active development of a product covered by such patents in that specific field. ICL may grant sublicenses under this license to third parties only with the Company’s prior approval. The Non-Exclusive License Agreement will continue in perpetuity unless earlier terminated. Intellectual Property Agreement with Mir Imran (the “Mir Agreement”) In June 2021, the Company, through Rani LLC, entered into the Mir Agreement, pursuant to which the Company and Mir Imran agreed that the Company would own all intellectual property conceived (a) using any of the Company’s people, equipment, or facilities or (b) that is within the field of oral delivery of sensors, small molecule drugs or biologic drugs including, any peptide, antibody, protein, cell therapy, gene therapy or vaccine. Neither the Company nor Mir Imran may assign the Mir Agreement to any third party without the prior written consent of the other party. The initial term of the Mir Agreement is three years, which can be extended upon mutual consent of the parties. The Mir Agreement may be terminated by either party for any reason within the initial three year term upon providing three months’ notice to the other party. Board Services During the year ended December 31, 2020, the Company made a $ 0.2 million payment to a member of the Board of Managers for legacy board services provided to the Company. Secondary Sales Transactions In February 2021, one of the Company's named executive officer's and then member of the Board of Managers, and a current member of the Board of Managers sold a total of 210,000 common units to a third-party investor at $ 7.1471 per unit. The Company determined that the sales price was above fair value of such units and as a result recorded equity-based compensation expense of $ 0.5 million for which $ 0.2 million was recorded as general and administrative expense and $ 0.3 million was recorded as research and development expense. The $ 0.5 million represents the difference between the sales price and fair value of the common units. Equity-Based Compensation In connection with the IPO and Organizational Transactions, the Company effectuated an exchange of all outstanding Profits Interests into Class A Units including certain Profits Interests related to ICL and its affiliates ("ICL Holders"). Upon the IPO and Organizational Transactions, the performance condition was met for all Profits Interest no longer subject to a service based vesting condition resulting in the recognition of compensation cost associated with these awards (Note 9). ICL Holders of 919,282 Class A Units exchanged 854,807 such units for the Company's Class A common stock, the remaining 64,475 Class A Units of Rani LLC continue to be outstanding and are exchangeable for the Company's Class A common stock at the option of the ICL Holders. The following table summarizes the components of equity-based compensation expense recorded in the condensed consolidated statement of operations and comprehensive loss related to awards granted to employees of ICL and its affiliates by the Company (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Research and development $ 644 — $ 644 — General and administrative 2,947 — 2,947 — Total $ 3,591 — $ 3,591 — Tax Receivable Agreement 19 Certain parties to the TRA, entered into in August 2021 pursuant to the IPO and Organizational Transactions, are related parties of the Company. The TRA provides that the Company pay to such entities and individuals 85% of the amount of tax benefits, if any, it is deemed to realize from exchanges of Paired Interests (Note 2). Registration Rights Agreement In connection with the IPO, the Company entered into a Registration Rights Agreement. ICL is a party to this agreement. The Registration Rights Agreement provides certain registration rights whereby, at any time following the IPO and the expiration of any related lock-up period, ICL Holders with LLC Interests can require the Company to register under the Securities Act of 1933, as amended (the “Securities Act”) shares of Class A common stock issuable to such ICL Holders upon, at the Company’s election, redemption or exchange of their Paired Interests. The Registration Rights Agreement also provides for piggyback registration rights. Rani LLC Agreement The Company operates its business through Rani LLC and its subsidiary. In connection with the IPO, the Company and the Continuing LLC Owners, including ICL, entered into the Rani LLC Agreement. The operations of Rani LLC, and the rights and obligations of the holders of LLC Interests, are set forth in the Rani LLC Agreement. As a Continuing LLC Owner, ICL is entitled to exchange, subject to the terms of the Rani LLC Agreement, Paired Interests for Class A common stock of the Company; provided that, at the Company’s election, the Company may effect a direct exchange of such Class A common stock or make a cash payment equal to a volume weighted average market price of one share of Class A common stock for each Paired Interest redeemed. No exchanges with ICL of Paired Interests occurred during the three and nine months ended September 30, 2021. 7. Warrants Preferred unit warrants In September 2020, in conjunction with a loan and security Agreement (Note 11), the Company issued warrants to purchase up to 118,929 Series E preferred units. The Series E warrants were exercisable for a period of seven years from the grant date at an exercise price of $ 7.1471 per unit. In the event of a change of control or IPO, the Series E warrants were to automatically be exchanged for the same number of units of the Company’s securities for no consideration had the holder of the warrant elected to exercise the warrant immediately prior to a change in control or IPO. In conjunction with the IPO, all of the Series E warrants were ultimately settled for 62,887 shares of the Company's Class A common stock. At December 31, 2020 there were 118,929 Series E warrants outstanding. There were no Series E warrants outstanding at September 30, 2021. Common unit warrants In 2017, in conjunction with the Series D convertible preferred unit financing, the Company issued 229,315 common unit warrants with an exercise price of $ 2.18 per unit and an exercise period of five years . The Company recorded the issuance-date fair value of the common warrants of $ 0.3 million in equity as the warrant met all criteria for equity classification. In January 2021, 6,000 common unit warrants were exercised at $ 2.18 per unit, and in July 2021 common unit warrants totaling 5,931 were exercised at $ 2.18 per unit. In connection with the IPO and Organizational Transactions, the remaining common warrants were net exercised for 71,867 Class A Units of Rani LLC of which 60,494 were then exchanged into shares of the Company's Class A common stock as part of the Organizational Transactions. At December 31, 2020 , 229,315 common unit warrants were outstanding. There were no common unit warrants outstanding at September 30, 2021. 8. Stockholders’ Equity / Members’ Deficit Prior to the Organizational Transactions, Rani LLC was authorized to issue 101,000,000 common units, of which 10,850,000 had been reserved for issuance as Profits Interests and 32,620,000 were reserved for six separate classes, the Series A convertible preferred units (the “Series A units”), the Series B convertible preferred units (the “Series B units”), the Series C convertible preferred units (the “Series C units”), the Series C-1 convertible preferred units (the “Series C-1 units”), the Series D convertible preferred units (the “Series D units”), and the Series E convertible preferred units (the “Series E units”), collectively the “Preferred Units”. The members of the Rani LLC who held these common and Preferred Units were not liable, solely by reason of being a member, for the debts, obligations, or liabilities of the Company whether arising in contract or tort; under a judgment, decree, or order of a court; or otherwise. The members were also not obligated to make capital contributions to the Rani LLC and Rani LLC would have dissolved only upon a written consent of a majority of the members. 20 The Company’s Profits Interests were subject to either a combination of service, market, or performance vesting conditions. Vested Profits Interests were treated as common units for purposes of distributions. Amendment and Restatement of Certificate of Incorporation In connection with the Organizational Transactions, the Company’s certificate of incorporation was amended and restated to, among other things, provide for the (i) authorization of 800,000,000 shares of Class A common stock with a par value of $ 0.0001 per share; (ii) authorization of 40,000,000 shares of Class B common stock with a par value of $ 0.0001 per share; (iii) authorization of 20,000,000 shares Class C common stock with a par value of $ 0.0001 per share; and (iv) authorization of 20,000,000 shares of preferred stock with a par value of $ 0.0001 per share. Holders of Class A common stock are entitled to one vote per share; holders of Class B common stock are entitled to ten votes per share; and holders of Class C common stock have no voting rights. Except as otherwise expressly provided in the Amended and Restated Certificate of Incorporation or as required by law, the holders of Class A common stock and Class B common stock (and, on any matter on which the Class C common stock or the holders of preferred stock are entitled to vote with the Class A common stock and the Class B common stock, the Class C common stock and the preferred stock) will vote together as a single class and not as separate series or classes. The Company is required to, at all times, maintain (i) a one-to-one ratio between the number of shares of Class A common stock outstanding and the number of Class A Units owned by Company and (ii) a one-to-one ratio between the number of shares of Class B common stock owned by the Continuing LLC Owners and the number of Class A Units owned by the Continuing LLC Owners. The Company may issue shares of Class B common stock only to the extent necessary to maintain these ratios. Shares of Class B common stock are not transferable except (a) to the Company for no consideration (in which case the shares will be cancelled automatically) or (b) together with an equal number of Class A Units to a transferee in compliance with the LLC Agreement and the provisions set forth in the Company’s amended and restated certificate of incorporation . All Class B common stock that is exchanged as part of a Paired Interest for Class A common stock shall be automatically retired and cancelled and shall no longer be outstanding. In August 2021, the Company received 29,290,391 Class B Units of Rani LLC as consideration for the issuance of Class B common stock on a one -for-one basis. Management of Rani LLC In August 2021, Rani LLC’s members and Board of Managers adopted the amended and restated Rani LLC Agreement to, among other things, appoint the Company as Rani LLC’s sole managing member and provide that, except where the approval of one or more members is specifically required by the express terms of the Rani LLC Agreement, all management powers over the business and affairs of Rani LLC are vested exclusively in the Company as the sole managing member. Initial Public Offering In July 2021, the Company completed an initial public offering of 7,666,667 shares of common stock, inclusive of the 1,000,000 shares of Class A common stock purchased by underwriters pursuant to the underwriters’ option to purchase additional shares at the initial public offering price, less underwriting discounts and commissions. The Company received net proceeds from the IPO of approximately $ 73.6 million after deducting underwriting discounts and commissions, which was used to purchase 7,666,667 newly-issued Class A Units of Rani LLC. Registration Rights Agreement In connection with the IPO, the Company entered into a Registration Rights Agreement with the Continuing LLC Owners, including ICL. The Registration Rights Agreement provides the Continuing LLC Owners certain registration rights whereby, at any time following the IPO and the expiration of any related lock-up period, the Continuing LLC Owners can require the Company to register under the Securities Act shares of Class A common stock issuable to them upon, at the Company’s election, redemption or exchange of their Paired Interests, and the Former LLC Owners can require the Company to register under the Securities Act the shares of Class A common stock issued to them in connection with the Organizational Transactions. The Registration Rights Agreement also provides for piggyback registration rights for the Continuing LLC Owners. 21 9. Equity-Based Compensation Stock-Based Compensation In July 2021, in connection with the IPO, the Company adopted and its stockholders approved the 2021 Plan. The 2021 Plan provides for the grant of incentive stock options ("ISOs"), non-statutory stock options ("NSOs"), stock appreciation rights, RSAs, RSUs, performance-based awards and other awards for shares of the Company’s Class A common stock. In July 2021, the Company's board of directors adopted and its stockholders approved, the Rani Therapeutics Holdings, Inc. 2021 Employee Stock Purchase Plan (the “ESPP”). As of September 30, 2021, the ESPP was not yet effective. The Company reserved 500,000 shares of Class A Common Stock for issuance under the ESPP and 5,500,000 shares of Class A common stock for future issuance under the 2021 Plan. Stock Options A summary of stock option activity during the periods indicated is as follows: Number of Stock Option Awards Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Balance at December 31, 2020 — — — Granted as replacement awards 1,212,124 $ 9.44 9.72 $ 10,158 Granted 907,400 $ 17.84 9.92 $ 1,244 Balance at September 30, 2021 2,119,524 $ 13.04 9.81 $ 11,402 Exercisable at September 30, 2021 57,806 $ 9.44 9.72 $ 484 Nonvested at September 30, 2021 2,061,718 $ 13.14 9.81 $ 10,918 In connection with the Organizational Transactions, 2,292,309 options for common units of Rani LLC still subject to service vesting conditions were canceled and replaced with 1,212,124 stock options to acquire the Company’s Class A common stock. This was considered to be a modification but did not result in modification accounting as it did not impact the awards’ vesting conditions, classification or fair value. These stock options vest based on the grantees continued services over a three or four year period. As of September 30, 2021 , there was $ 17.8 million of unrecognized equity-based compensation expense related to stock options which is expected to be recognized over a weighted-average period of approximately 3.5 years. Restricted Stock Units A summary of RSU activity during the periods indicated is as follows: Number of Restricted Stock Units Weighted Average Grant-Date Fair Value per Share Balance at December 31, 2020 — — Granted 599,500 $ 19.56 Forfeited ( 2,000 ) $ 19.56 Balance at September 30, 2021 597,500 $ 19.56 As of September 30, 2021 , there was $ 11.4 million of unrecognized equity-based compensation expense related to RSUs which is expected to be recognized over a weighted-average period of approximately 1.9 years. 22 Restricted Stock Awards A summary of RSA activity during the periods indicated is as follows: Number of Restricted Stock Awards Weighted Average Grant-Date Fair Value per Share Balance at December 31, 2020 — — Granted as replacement of Profits Interests 137,691 $ 5.78 Vested ( 15,058 ) $ 5.72 Forfeited ( 2,718 ) $ 6.11 Balance at September 30, 2021 119,915 $ 5.79 In connection with the IPO and Organizational Transactions, 397,500 Profits Interests of Rani LLC were canceled and replaced with 137,691 RSAs of the Company’s Class A common stock. This was considered to be a modification but did not result in modification accounting as it did not impact the awards’ vesting conditions, classification or fair value. The RSAs are subject to both service vesting conditions and the Company's reacquisition right of unvested RSAs from the holder, for no monetary consideration, upon the termination of continuous service by the holder. The RSAs are not deemed to be issued for accounting purposes until they vest and are therefore excluded from shares outstanding for accounting purposes until the repurchase right lapses and the shares are no longer subject to the reacquisition right. As of September 30, 2021, there was $ 0.7 million of unrecognized equity-based compensation expense related to RSAs which is expected to be recognized over a weighted-average period of approximately 3.3 years. Unit-Based Compensation Prior to the IPO, Rani LLC had adopted the 2016 Equity Incentive Plan (the “2016 Plan”) under which the Board of Managers issued options for common units, Profits Interests, and restricted common units to managers, consultants or other individuals who provide service to the Company. The Board of Managers had the authority to determine to whom Profits Interests would be granted, the number of options granted, and the Profits Interests threshold amount, which was the minimum amount determined by the Board of Managers in its reasonable discretion to be necessary to cause such interests to be treated as Profits Interests (“Threshold Amounts”). In 2020, the Board of Managers approved an additional 2,000,000 common units to be reserved under the Plan for issuance as Profit Interests. Effective April, 2021, in anticipation of the IPO the Company ceased granting Profits Interests and began to issue options for common units out of the remaining pool. In July 2021, the 2016 Plan was terminated concurrent with the adoption of the 2021 Plan. Immediately upon receipt of a Profits Interests award, the recipient had no initial capital account balance and the Profits Interests received did not entitle such recipient to any portion of the capital of Rani LLC at the time of such recipient’s admission to Rani LLC as an unitholder member, such that if Rani LLC’s assets were sold at fair market value immediately after the grant to such recipient of Profits Interests and the proceeds distributed in complete liquidation of Rani LLC, the Profits Interests received would entitle such recipient to receive no portion of those proceeds. Additionally, Rani LLC would not make a distribution with respect to any Profits Interests unless Rani LLC had made aggregate distributions to each interest subject to a lower or no Profits Interests Threshold Amount. The common units underlying each Profits Interests award entitled the holder, upon a sale or other specified capital transaction (as set forth in the Operating Agreement), to participate in a portion of the profits and appreciation in the equity value of Rani LLC arising after the date of grant, as determined in reference to the Profits Interests Threshold Amount set forth in each award agreement. Profits Interests A summary of Profits Interests activity during the periods indicated is as follows: Number of Profits Interests Weighted Average Grant Date Fair Value Profits Interests Threshold Balance at December 31, 2020 6,926,358 $ 1.63 $ 1.44 - $ 2.29 Granted 1,857,000 $ 2.13 $ 1.99 - $ 2.13 Forfeited ( 235,957 ) $ 2.04 $ 1.45 - $ 2.29 Vested ( 8,149,901 ) $ 1.70 $ 1.44 - $ 2.29 Canceled and replaced with restricted stock awards ( 397,500 ) $ 2.13 $ 1.99 - $ 2.13 Balance at September 30, 2021 — $ — 23 In connection with the IPO and Organizational Transactions, 1,771,767 units of unvested Profits Interests that contained a performance condition were modified to accelerate their vesting in return for exchanging such awards for shares of the Company’s Class A common stock upon an IPO. Concurrent with the IPO, such Profits Interests holders exchanged their then issued 3,201,220 Class A Units of Rani LLC for 1,655,409 shares of the Company’s Class A common stock. This resulted in an improbable to improbable modification and resulted in the remeasurement of the related compensation cost at the fair value of these Profits Interests on the modification date in July 2021. As a result of the modification and based on the performance condition being satisfied with the IPO and Organizational Transactions in July 2021, the Company recognized an incremental equity-based compensation expense of $ 3.0 million for the three and nine months ended September 30, 2021. Profits Interests of 397,500 still subject to service based vesting, but where the performance condition associated with the IPO and Organizational Transactions had been met, were exchanged for 137,691 RSAs with the same remaining service vesting conditions. All Profits Interests no longer subject to a vesting condition and that did not participate in the exchange, were converted into 1,545,811 Class A Units of Rani LLC. Upon the IPO and Organizational Transactions, the performance condition was met for all Profits Interest no longer subject to a service based vesting condition and the Company recorded an additional $ 14.0 million of equity-based compensation expense. Options for Common Units A summary of options for common units activity during the periods indicated is as follows: Number of Unit Option Awards Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Balance at December 31, 2020 — — — Granted 2,292,309 4.99 9.89 Canceled and replaced with stock options ( 2,292,309 ) 4.99 9.89 Balance at September 30, 2021 — — — — Throu gh July 2021, the Company granted options to acquire 2,292,309 common units of Rani LLC to certain executives and members of the Board of Managers. In conjunction with the Organizational Transactions, these unit options were canceled and replaced with stock options of the Company. The following table summarizes the components of equity-based compensation expense resulting from the grant of stock options, RSUs, RSAs, Profits Interests, and options for common units, recorded in the Company’s condensed consolidated statement of operations and comprehensive loss (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Research and development $ 6,635 — $ 6,696 — General and administrative 12,061 — 12,282 — Total equity-based compensation $ 18,696 — $ 18,978 — 10. Commitments and Contingencies Leases Rani LLC pays for the use of its office, laboratory and manufacturing facilities in San Jose, California as part of the services agreement with ICL (Note 6), which is accounted for as an operating lease with an implied renewal option into 2025. Rent expense incurred with ICL was $ 0.6 million for each of the nine month periods ended September 30, 2021 and 2020. Legal Proceedings In the ordinary course of business, the Company may be subject to legal proceedings, claims and litigation as the Company operates in an industry susceptible to patent legal claims. The Company accounts for estimated losses with respect to legal proceedings and claims when such losses are probable and estimable. Legal costs associated with these matters are expensed when 24 incurred. The Company is currently involved in several opposition proceedings at the European Patent Office, all of which were asserted against us by Novo Nordisk AS. The ultimate outcome of this matter as a loss is not probable nor is there any amount that is reasonably estimable. However, the outcome of the opposition proceedings could impact the Company’s ability to commercialize its products in Europe. 11. Long-Term Debt Convertible Notes In September 2020, Rani LLC, entered into a secured convertible loan agreement (the “Loan and Security Agreement” or the “Loan”) with Avenue Venture Opportunity Fund L.P. (“Avenue”), whereby Rani LLC could borrow up to a maximum of $ 10.0 million, with $ 3.0 million being immediately available. The remaining $ 7.0 million available could be borrowed if Avenue received evidence of at least $ 40.0 million of net cash proceeds from the sale or issuance of securities to existing investors, or upfront payments in connection with strategic partnerships by March 31, 2021. Rani LLC opted not to draw down this additional amount, and the option has since expired undrawn. In exchange for access to this facility, Rani LLC agreed to issue warrants exercisable into Rani LLC preferred units amounting to $ 0.9 million; Rani LLC subsequently granted 118,929 Series E warrants with an exercise price of $ 7.1471 per unit (Note 7). The Loan was interest only until September 2021 and bore interest at a variable rate of interest per annum, compounded monthly until its maturity date of September 2023 , at which time all outstanding principal and interest would have become due and payable in cash if not already converted. Rani LLC’s obligations under the Loan were secured by a first priority security interest in substantially all of its assets. The Loan included customary events of default, including instances of a material adverse change in the Rani LLC’s operations, which may require prepayment of the outstanding Loan. At December 31, 2020 the effective interest rate on the Loan was 20.56 %. At September 30, 2021 there was no Loan outstanding. The Loan contained a contingent interest feature in the event of default that was not clearly and closely related to the underlying note and met the definition of a derivative. The Company concluded that the fair value of this derivative was insignificant for all periods presented. The Loan and Security Agreement contained negative and affirmative covenants, including covenants that restricted the ability of Rani LLC and its current and future subsidiaries' ability to, among other things, incur or prepay existing indebtedness, pay dividends or distributions, dispose of assets, engage in mergers and consolidations, make acquisitions or other investments, and make changes in the nature of the business. The Loan and Security Agreement also contained certain objective events of default, including, without limitation, nonpayment of principal, interest or other obligations, violation of the covenants, insolvency, court ordered judgments, and change in control. The Loan and Security Agreement required Rani LLC to provide audited consolidated financial statements to the lenders no later than 120 days after year-end. In July 2021, the Company repaid, in full, the $ 3.0 million of principal and approximately $ 0.5 million of final payment and fees under the Loan and Security Agreement resulting in a $ 0.7 million loss on extinguishment of debt recorded in the Company's condensed consolidated statement of operations and comprehensive loss for the three and nine months ended September 30, 2021. Avenue Capital also waived their right to convert the outstanding principal into Series E Preferred Units. Paycheck Protection Program Loan In April 2020, the Company received a $ 1.3 million small business loan under the Paycheck Protection Program (“PPP Loan”) as part of the CARES Act. The PPP Loan was due to mature in April 2022 , and bore interest at a rate of 1.0 % per annum. The PPP Loan was evidenced by a promissory note, which contained customary events of default relating to, among other things, payment defaults and breaches of representations and warranties. The PPP Loan could be prepaid at any time prior to maturity with no prepayment penalties. The Company used all proceeds from the PPP Loan to retain employees, maintain payroll and make lease and utility payments. In September 2021, the Company repaid in full the $ 1.3 million of principal and interest related to the PPP Loan. 12. Income Taxes The Company is the managing member of Rani LLC and, as a result, consolidates the financial results of Rani LLC and its taxable subsidiary RMS in the unaudited condensed consolidated financial statements. Rani LLC is a pass-through entity for U.S. federal and most applicable state and local income tax purposes following the IPO and Organizational Transactions. As an entity 25 classified as a partnership for tax purposes, Rani LLC is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Rani LLC is passed through to, and included in the taxable income or loss of its members, including the Company. The Company is taxed as a corporation and pays corporate federal, state and local taxes with respect to income allocated to the Company, based on the Company's economic interest in Rani LLC. The Company's tax provision also includes the activity of RMS, which is taxed as a corporation for federal and state income tax purposes. The Company anticipates this structure to remain in existence for the foreseeable future. The Company’s effective income tax rate was ( 0.22 )% and ( 0.21 )% for the three and nine months ended September 30, 2021 , respectively, and ( 0.21 )% for the three and nine months ended September 30, 2020. The Company has evaluated the positive and negative evidence surrounding the realization of its deferred tax assets, including the Company’s history of losses, and under the applicable accounting standards determined that it is more-likely-than-not that the deferred tax assets will not be realized. There were no material changes to uncertain tax positions for the three and nine months ended September 30, 2021 and 2020, and the Company does not anticipate material changes within the next 12 months. The Company is party to a TRA with the Continuing LLC Owners (Note 2). As there have been no transactions which have occurred which would trigger a liability under this agreement, the Company has no t recognized any deferred tax assets or liabilities related to this agreement as of September 30, 2021 . 13. Net Loss Per Share The following table sets forth the computation of basic and diluted net loss per Class A common share attributable to Rani Therapeutics Holding, Inc. (in thousands, except per share data): Three Months Ended September 30, Nine Months Ended September 30, 2021 2021 Numerator: Net loss per Class A common share attributable to Rani Therapeutics Holding, Inc. $ ( 3,142 ) $ ( 3,142 ) Denominator: Weighted average Class A common share outstanding—basic and diluted 19,437 19,437 Net loss per Class A common share attributable to Rani Therapeutics Holding, Inc.—basic and diluted $ ( 0.16 ) $ ( 0.16 ) The following table shows the total outstanding securities considered anti-dilutive and therefore excluded from the computation of diluted net loss per Class A common share attributable to Rani Therapeutics Holding, Inc.: Nine Months Ended September 30, 2021 Paired Interests 29,290,391 Stock options 2,119,524 Class A Units of Rani LLC exchangeable for Class A common stock 1,545,811 Restricted stock units 597,500 Restricted stock awards 119,915 33,673,141 Shares of Class B Common Stock do not share in the Company’s earnings and are not participating securities. Accordingly, separate presentation of loss per share of Class B common stock under the two-class method has not been provided. The outstanding shares of Class B Common Stock were determined to be antidilutive for the three and nine months ended September 30, 2021. Therefore, they are not included in the computation of net loss per Class A common share attributable to Rani Therapeutics Holding, Inc. 26 Ite m 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited interim condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q, and our final prospectus filed with the Securities and Exchange Commission ("SEC") pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, dated August 2, 2021 (the “Prospectus”) . Some of the information contained in this discussion and analysis or set forth elsewhere in this document, includes forward looking statements that involve risks, uncertainties, and assumptions. You should carefully read the “Special Note Regarding Forward-Looking Statements” and “Risk Factors” sections of this document for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. The following discussion contains references to calendar year 2020 and the nine months ended September 30, 2020 and September 30, 2021, which represents the condensed consolidated financial results of Rani Therapeutics Holdings, Inc. (the "Company") and its subsidiaries for the year ended December 31, 2020 and the nine months ended September 30, 2020 and 2021, respectively. Unless we state otherwise or the context otherwise requires, the terms “we,” “us,” “our,” and “Rani” and similar references refers to the Company and its consolidated subsidiaries. Overview We are a clinical stage biotherapeutics company advancing technologies to enable the development of orally administered biologics. We have developed the RaniPill capsule, which is our novel, proprietary and patented platform technology, intended to replace subcutaneous or IV injection of biologics with oral dosing. The RaniPill capsule is an orally ingestible pill approximately the size of a “000” capsule (or similar to the size of a standard fish oil or calcium pill) that is designed to automatically administer a precise therapeutic dose of medication upon deployment in the small intestine. To date, we have successfully conducted several preclinical and clinical studies to evaluate safety, tolerability and bioavailability using the RaniPill capsule. Our development efforts have enabled us to construct an extensive intellectual property portfolio that we believe provides us a competitive advantage. Our pipeline includes five core product candidate programs. Additionally, we envision complementing these core programs with robust partnering activities to maximize the value inherent in the RaniPill capsule. Since our inception in 2012, we have devoted the majority of our resources to research and development, manufacturing automation and scaleup, and establishing our intellectual property portfolio. To date, we have financed our operations primarily through an initial public offering ("IPO"), private placements of our preferred units and the issuance of convertible promissory notes, with aggregate gross proceeds of $282.4 million, as well as revenue generated from evaluation agreements. We expect that our cash and cash equivalents of $129.7 million as of September 30, 2021 will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next twelve months. We do not have any products approved for sale, and we have not yet generated any revenue from sales of a commercial product. Our ability to generate product revenue sufficient to achieve profitability, if ever, will depend on the successful development of the RaniPill capsule, which we expect will take a number of years. Given our stage of development, we have not yet established a commercial organization or distribution capabilities, and we have no experience as a company in marketing drugs or a drug-delivery platform. When, and if, any of our product candidates are approved for commercialization, we plan to develop a commercialization infrastructure for those products in the United States, Europe, Asia, and potentially in certain other key markets. We may also rely on partnerships to provide commercialization infrastructure, including sales, marketing, and commercial distribution. Since our inception, we have incurred significant losses and negative cash flows from operations. Our net losses were $28.7 million and $39.8 million for the three and nine months ended September 30, 2021, respectively, of which $3.1 million was attributable to Rani Therapeutics Holdings, Inc. for the three and nine months ended September 30, 2021. As of September 30, 2021, we had an accumulated deficit of $3.1 million. We expect to continue to incur significant losses for the foreseeable future, and our net losses may fluctuate significantly from period to period, depending on the timing of and expenditures on our planned research and development activities. Until such time as we can generate sufficient revenue from commercial product sales, if ever, we expect to finance our operations through a combination of equity offerings and debt financings, or other capital sources, which may include strategic collaborations or other arrangements with third parties. We may be unable to raise additional funds or to enter into such agreements or arrangements on favorable terms, or at all. If we are unable to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates. Insufficient liquidity may also require us to relinquish rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. 27 Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and disruptions to and volatility in the credit and financial markets in the United States and worldwide, such as those resulting from the ongoing COVID-19 pandemic. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from commercial product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and may be forced to reduce or terminate our operations. As is common with biotechnology companies, we rely on third-party suppliers for the supply of raw materials and active pharmaceutical ingredients ("APIs") required for the production of our product candidates. In addition, we work with third parties to manufacture and develop biologics for inclusion in the RaniPill capsule. Design work, prototyping and pilot manufacturing are performed in-house, and we have utilized third-party engineering firms to assist with the design of manufacturing lines that support our supply of the RaniPill capsule. Certain of our suppliers of components and materials are single source suppliers. We believe our vertically integrated manufacturing strategy will offer significant advantages, including rapid product iteration, control over our product quality and the ability to rapidly scale our manufacturing capacity. This capability also allows us to develop future generations of products while maintaining the confidentiality of our intellectual property. Our vertically integrated manufacturing strategy will result in material future capital outlays and fixed costs related to constructing and operating a manufacturing facility. We have and plan to continue to invest in automated manufacturing production lines for the RaniPill capsule. Those assets deemed to have an alternative future use have been capitalized as property and equipment while those projects related to our assets determined to not have an alternative future use have been expensed as research and development costs. COVID-19 Pandemic Since it was reported to have surfaced in late 2019, COVID-19 has spread across the world and has been declared a pandemic by the World Health Organization. Efforts to contain the spread of COVID-19 have intensified and governments around the world, including in the United States, Europe and Asia, have implemented precautions such as travel restrictions, social distancing requirements, and stay-at-home orders. As a result, the current COVID-19 pandemic has presented a substantial global public health and economic challenge and is affecting our employees and business operations, as well as contributing to significant volatility and negative pressure on the U.S. economy and in financial markets. The COVID-19 pandemic has and may continue to impact the Company’s third-party manufacturers and suppliers, which could disrupt its supply chain or the availability or cost of materials. The effects of the public health directives and the Company’s work-from-home policies may negatively impact productivity, disrupt its business, and delay clinical programs and timelines and future clinical trials, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on the Company’s ability to conduct business in the ordinary course. These and similar, and perhaps more severe, disruptions in the Company’s operations could negatively impact business, results of operations and financial condition, including its ability to obtain financing. We have initiated, and may take additional, temporary precautionary measures intended to help ensure our employees’ well-being and minimize business disruption. For the safety of our employees and their families, we have temporarily reduced the presence of our employees in our office and continue to rely on third parties to conduct many of the experiments and preclinical studies for our research programs. Certain third-party service providers have also experienced shutdowns or other business disruptions. The extent to which the COVID-19 pandemic may affect our business, operations and development timelines and plans, including the resulting impact on expenditures and capital needs, remains uncertain. Organizational Transactions The Company was incorporated in April 2021 and formed for the purpose of facilitating the initial public offering ("IPO") in order to carry on the Company’s business. In connection with the IPO, the Company became a holding company and its principal asset is the Class A common units (“Class A Units”) of Rani Therapeutics, LLC ("Rani LLC") that it owns. As the sole managing member of Rani LLC, the Company operates and controls all of Rani LLC’s operations, and through Rani LLC and its subsidiary, conducts all of Rani LLC’s business and the financial results of Rani LLC and its consolidated subsidiary will be included in the consolidated financial statements of the Company. Rani LLC has been, and after the IPO continues to be, treated as a pass-through entity for U.S. federal and state income tax purposes and accordingly has not been subject to U.S. federal or state income tax. The wholly owned subsidiary of Rani LLC, Rani Management Services, Inc. ("RMS"), which was incorporated in 2019, is taxed as a corporation for U.S. federal and most applicable state, local income tax and foreign tax purposes. As a result of its ownership of interests in Rani LLC ("LLC Interests"), the Company is subject to U.S. federal, state and local income taxes with respect to its allocable share of any taxable income of Rani LLC and will be taxed at the prevailing corporate tax rates. In addition to tax expenses, we also will incur expenses related to our operations and we are required to make payments under the Tax Receivable Agreement with certain of the individuals and entities that continue to hold interests in Rani LLC after the IPO (the "Continuing LLC Owners"). Due to the uncertainty of various factors, we cannot 28 estimate the likely tax benefits we will realize as a result of LLC Interests exchanges, and the resulting amounts we will likely pay out to the Continuing LLC Owners pursuant to the Tax Receivable Agreement; however, we estimate that such payments may be substantial in the event we are profitable. Components of Results of Operations Contract Revenue To date, we have not generated any revenue from commercial product sales and do not expect to generate any revenue from the sale of commercial products in the foreseeable future. Our only revenue has been derived from the evaluation agreements, which are recorded as contract revenue. As of September 30, 2021, we had no active evaluation agreements, and therefore we expect that our revenue for the next several years will be derived from any new agreements that we may enter into in the future. Our ability to generate commercial product revenue and to become profitable will depend upon our ability to successfully develop, obtain regulatory approval and commercialize the capsule. Because of the numerous risks and uncertainties associated with product development and regulatory approval, we are unable to predict the amount, timing or whether we will be able to obtain commercial product revenue. Operating Expenses Our operating expenses consisted of research and development expenses and general and administrative expenses. Research and Development Expense Research and development expense consists primarily of direct and indirect costs incurred in connection with our research and development activities to commercialize the RaniPill capsule. These expenses include: External expenses, consisting of: • expenses associated with contract research organizations ("CROs"), for managing and conducting clinical trials; • expenses associated with laboratory supplies, drug material for clinical trials, developing and manufacturing of the RaniPill capsule and other materials; • expenses associated with preclinical studies performed by third parties; and • expenses associated with consulting, legal fees for patent matters, advisors, and other external expenses. Internal expenses, consisting of: • expenses including salaries, bonuses, equity-based compensation and benefits for personnel engaged in research and development functions; • expenses associated with service and repair of equipment, equipment depreciation, and allocated facility costs for research and development; and • other research and development costs related to compliance with quality and regulatory requirements. We expense research and development costs as incurred. Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid or accrued research and development expenses. Nonrefundable advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered, or the services rendered. Until future commercialization is considered probable and the future economic benefit is expected to be realized, we do not capitalize pre-launch inventory costs. Costs of property and equipment related to scaling-up our manufacturing capacity for clinical trials and to support commercialization are capitalized as property and equipment unless the related asset does not have an alternative future use. 29 The historical focus of our research and development has been on the RaniPill delivery platform and not tracked costs on a project-by-project basis associated with different drug compounds. At this time, we cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, the RaniPill capsule. We expect our research and development expenses to increase significantly in the foreseeable future as we continue to invest in research and development activities related to developing the RaniPill capsule, as our product candidates advance into later stages of development, as we begin to conduct larger clinical trials, as we seek regulatory approvals for the RaniPill capsule upon successful completion of clinical trials, and incur expenses associated with hiring additional personnel to support our research and development efforts. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, the successful development of the RaniPill capsule is highly uncertain, and we may never succeed in achieving regulatory approval for the RaniPill capsule. General and Administrative Expenses General and administrative expenses consist primarily of personnel-related costs (including salaries, bonuses, equity-based compensation, and benefits) for personnel in executive, finance, accounting, legal, corporate and business development, and other administrative functions. General and administrative expenses also include legal fees relating to corporate matters, professional fees paid for accounting, auditing, consulting, tax, and administrative consulting services, insurance costs, travel expenses, marketing expenses, and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs. We anticipate that our general and administrative expenses will increase significantly in the foreseeable future as additional administrative personnel and services are required to manage and support the development of the RaniPill capsule. We also anticipate that we will incur increased expenses associated with operating as a public company, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance costs, and investor and public relations costs. Other Income (Expense), Net Other income (expense), net primarily consists of interest income on our cash and cash equivalents and income (expense) associated with re-measurements of the estimated fair value of preferred unit warrants and loss on the extinguishment of debt. Relationship with InCube Labs Services Agreements In January 2019, we entered into a one year service agreement with InCube Labs, LLC ("ICL"), the majority holder of the Company's common units and a related party. This agreement was amended in January 2020 to extend the period for an additional year and expired in December 2020. We are presently operating under a service agreement with ICL executed in June 2021, retroactive to January 1, 2021. We or ICL may terminate services under the service agreement upon 60 days' notice to the other party, except for occupancy which requires six months' notice. The service agreement specifies the scope of services to be provided by ICL as well as the methods for determining the costs of services for the year ended December 31, 2021. Costs are billed on a monthly basis and based upon the hours incurred by ICL employees working on our behalf as well as allocations of expenses based upon our utilization of ICL’s facilities and equipment. In June 2021, RMS entered into the RMS-ICL Service Agreement effective January 1, 2021, pursuant to which ICL agreed to rent a specified portion of its facility to RMS. Additionally, RMS and ICL agreed to provide personnel services to the other upon requests based on rates specified in the agreement. The RMS-ICL Service Agreement has a 12-month term and will automatically renew for successive 12-month periods unless terminated. For the nine months ended September 30, 2021 and 2020, RMS charged ICL $0.3 million and $0.5 million for services performed, respectively, and such amounts charged were recorded as a reduction to research and development expense in the condensed consolidated statement of operations and comprehensive loss. Our eligible employees are permitted to participate in ICL’s 401(k) Plan (“401(k) Plan”). Participation in the 401(k) Plan is offered for the benefit of our employees, including our named executive officers, who satisfy certain eligibility requirements. As of September 30, 2021, all of our facilities are owned by an entity affiliated with one of our directors, who is also the owner of ICL. We pay for the use of these facilities through the service agreement with ICL. 30 The table below details the amounts charged by ICL for services and rent, net of the amount that RMS charged ICL, which is included in the condensed consolidated statements of operations and comprehensive loss (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Research and development $ 222 $ (22 ) $ 377 $ 98 General and administrative 149 174 516 625 Total $ 371 $ 152 $ 893 $ 723 Equity-Based Compensation In connection with the IPO and Organizational Transactions, the Company effectuated an exchange of all outstanding Profits Interests into Class A Units including certain Profits Interests related to ICL and its affiliates ("ICL Holders"). Upon the IPO and Organizational Transactions, the performance condition was met for all Profits Interest no longer subject to a service based vesting condition resulting in the recognition of compensation cost associated with these awards. ICL Holders of 919,282 Class A Units exchanged 854,807 such units for the Company's Class A common stock, the remaining 64,475 Class A Units of Rani LLC continue to be outstanding and are exchangeable for the Company's Class A common stock at the option of the ICL Holders. The following table summarizes the components of equity-based compensation expense recorded in the condensed consolidated statement of operations and comprehensive loss related to awards granted to employees of ICL and its affiliates by the Company (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Research and development $ 644 — $ 644 — General and administrative 2,947 — 2,947 — Total $ 3,591 — $ 3,591 — Financing activity From inception to December 31, 2017, we advanced funds to ICL, and ICL made payments directly to certain vendors on behalf of us. We have reimbursed ICL for all such payments at cost on a monthly basis. In June 2017, we converted the outstanding advances of $6.6 million to ICL into notes receivable. The notes provided for interest at 1.97% compounded annually, loan fees of 2.75% and were payable upon demand to us any time after January 1, 2024. During 2020, we received $1.0 million in payments for interest and repayment of principal on the ICL notes receivable. During the nine months ended September 30, 2020, payments for interest and repayment of principal on the ICL note receivable was insignificant. During the nine months ended September 30, 2021, we received $1.7 million for interest and principal on the ICL notes receivable. As of December 31, 2020, $1.7 million of the notes were outstanding. The outstanding balance, including all accrued interest, was fully repaid in March 2021. In December 2020, we amended the terms of certain expired warrants to purchase Series B units (the "Series B Warrants"), issued to InCube Ventures II, LP ("ICV II"), a related party and entity affiliated with ICL, by extending its exercise period for an additional two years. In December 2020, ICV II elected to cashless exercise all of their Series B Warrants and Rani LLC issued 51,341 Series B units. Exclusive License Agreement In June 2021, we and ICL entered into an Amended and Restated Exclusive License Agreement which replaces the 2012 Exclusive License Agreement, as amended in 2013, and terminates the Intellectual Property Agreement, as amended in June 2013. Under the Amended and Restated License Agreement, we will have a fully paid, exclusive license under certain scheduled patents related to optional features of the device and certain other scheduled patents to exploit products covered by those patents in the field of oral delivery of sensors, small molecule drugs or biologic drugs including, any peptide, antibody, protein, cell therapy, gene therapy or vaccine. We will cover patent-related expenses and, after a certain period, we will have the right to acquire four specified U.S. patent families from ICL by making a one-time payment of $0.3 million to ICL for each U.S. patent family that the Company desires to acquire, up to $1.0 million in the aggregate. This payment will not become an obligation until the fifth anniversary of the Amended and Restated Exclusive License Agreement. The Amended and Restated Exclusive License Agreement will terminate when there are no remaining valid claims of the patents licensed under the Amended and Restated Exclusive License Agreement. Additionally, we 31 may terminate the Amended and Restated Exclusive License Agreement in its entirety or as to any particular licensed patent upon notification to ICL of such intent to terminate. Non-Exclusive License Agreement between Rani and ICL (“Non-Exclusive License Agreement”) In June 2021, we entered into the Non-Exclusive License Agreement with ICL a related party, pursuant to which we granted ICL a non-exclusive, fully-paid license under specified patents that were assigned from ICL to the Company. Additionally, we agreed not to license these patents to a third party in a specific field outside the field of oral delivery of sensors, small molecule drugs or biologic drugs including, any peptide, antibody, protein, cell therapy, gene therapy or vaccine, if ICL can prove that it or its sublicensee has been in active development of a product covered by such patents in that specific field. ICL may grant sublicenses under this license to third parties only with our prior approval. The Non-Exclusive License Agreement will continue in perpetuity unless terminated. Intellectual Property Agreement with Mir Imran (the “Mir Agreement”) In June 2021, we entered into the Mir Agreement, pursuant to which we and Mir Imran agreed that we would own all intellectual property conceived (a) using any of our people, equipment, or facilities or (b) that is within the field of oral delivery of sensors, small molecule drugs or biologic drugs including, any peptide, antibody, protein, cell therapy, gene therapy or vaccine. Neither us nor Mir Imran may assign the Mir Agreement to any third party without the prior written consent of the other party. The initial term of the Mir Agreement is three years, which can be extended upon mutual consent of the parties. The Mir Agreement may be terminated by either party for any reason within the initial three year term upon providing three months’ notice to the other party. Tax Receivable Agreement Certain parties to the TRA, entered into in August 2021 pursuant to the IPO and Organizational Transactions, are related parties of the Company. The TRA provides that the Company pay to such entities and individuals 85% of the amount of tax benefits, if any, it is deemed to realize from exchanges of Paired Interests. Registration Rights Agreement In connection with the IPO, we entered into a Registration Rights Agreement with the Continuing LLC Owners, including ICL. The Registration Rights Agreement provides the Continuing LLC Owners certain registration rights whereby, at any time following the IPO and the expiration of any related lock-up period, the Continuing LLC Owners can require us to register under the Securities Act shares of Class A common stock issuable to them upon, at our election, redemption or exchange of their LLC Interests, and the Former LLC Owners can require us to register under the Securities Act of 1933, as amended (the “Securities Act”), the shares of Class A common stock issued to them in connection with the Organizational Transactions. The Registration Rights Agreement also provides for piggyback registration rights for the Continuing LLC Owners. Rani LLC Agreement The Company operates its business through Rani LLC and its subsidiary. In connection with the IPO, the Company and the Continuing LLC Owners, including ICL, entered into the Rani LLC Agreement. The operations of Rani LLC, and the rights and obligations of the holders of LLC Interests, are set forth in the Rani LLC Agreement. As a Continuing LLC Owner, ICL is entitled to exchange, subject to the terms of the Rani LLC Agreement, Paired Interests for Class A common stock of the Company; provided that, at the Company’s election, the Company may effect a direct exchange of such Class A common stock or make a cash payment equal to a volume weighted average market price of one share of Class A common stock for each Paired Interest redeemed. No exchanges with ICL of Paired Interests occurred during the three and nine months ended September 30, 2021. Future Public Company Expenses As a result of the IPO, we expect our operating expenses to increase. We expect our accounting, legal and personnel-related expenses and directors’ and officers’ insurance costs reported within general and administrative to increase as we establish more comprehensive compliance and governance functions, maintain and review internal controls over financial reporting in accordance with the Sarbanes-Oxley Act of 2002 and prepare and distribute periodic reports as required by the rules and regulations of the SEC. As a result, our historical results of operations may not be indicative of our results of operations in future periods. 32 Results of Operations Comparison of the three months ended September 30, 2021 and 2020 The following table summarizes our results of operations (in thousands): Three Months Ended September 30, 2021 2020 Contract revenue $ — $ 108 Operating expenses Research and development 11,959 2,090 General and administrative 15,822 845 Total operating expenses $ 27,781 $ 2,935 Loss from operations (27,781 ) (2,827 ) Other income (expense), net Interest income 13 13 Loss on extinguishment of debt (700 ) — Interest expense and other, net (110 ) (64 ) Change in estimated fair value of preferred unit warrant (85 ) — Loss before income taxes (28,663 ) (2,878 ) Income tax expense (37 ) (5 ) Net loss and comprehensive loss $ (28,700 ) $ (2,883 ) Net loss attributable to non-controlling interest (25,558 ) (2,883 ) Net loss attributable to Rani Therapeutics Holdings, Inc. $ (3,142 ) $ — Contract Revenue Contract revenue was $0.1 million for the three months ended September 30, 2020, which was attributable to our evaluation agreement with Takeda. In May 2021, we received notice from Takeda as to their intent to terminate the contract for convenience and as such we did not have any revenues for the three months ended September 30, 2021. Research and Development Expenses The following table reflects our research and development costs by nature of expense (in thousands): Three Months Ended September 30, 2021 2020 Payroll, equity-based compensation and related benefits $ 10,039 $ 1,334 Facilities, materials and supplies 1,005 542 Third-party services 812 180 Other 103 34 Total $ 11,959 $ 2,090 Research and development expenses were $12.0 million for the three months ended September 30, 2021, compared to $2.1 million for the three months ended September 30, 2020. The change in research and development expense was attributed to an increase of $1.9 million in salaries and related benefit costs due to higher headcount, the equity-based compensation increased by $6.6 million attributed to the vesting and recognition of the Profits Interests expense in connection with the IPO and Organizational Transactions, and additional compensation as a result of a modification of certain Profits Interests, and increase in laboratory supplies of $0.4 million and third-party services of $0.6 million as a result of increasing research and development activities at the Company. General and Administrative Expenses General and administrative expenses were $15.8 million for the three months ended September 30, 2021, compared to $0.8 million for the three months ended September 30, 2020. During the three months ended September 30, 2021, the equity-based compensation increased by $12.1 million attributed to the vesting and recognition of the Profits Interests expense in connection with the IPO and Organizational Transactions, and additional compensation as a result of a modification of certain Profits Interests, professional and consulting services expense increased by $1.1 million primarily due to the costs associated with preparing to operate 33 as a public company, salaries and related benefits increased by $1.2 million due to higher headcount, and facility costs increased $0.5 million to support the increase in headcount. Other Income (Expense), Net Other expense, net, was $0.9 million for the three months ended September 30, 2021, which related to $0.7 million of loss on the extinguishment of debt in July 2021, $0.1 million of interest expense on the debt, and $0.1 million due to the increase in the estimated fair value of the Series E preferred unit warrants prior to their conversion. Other expense, net, for the three months ended September 30, 2020 was primarily comprised of interest expense on the debt which was entered into in the third quarter of 2020. Comparison of the nine months ended September 30, 2021 and 2020 The following table summarizes our results of operations (in thousands): Nine Months Ended September 30, 2021 2020 Contract revenue $ 2,717 $ 252 Operating expenses Research and development 19,065 8,708 General and administrative 21,889 3,144 Total operating expenses $ 40,954 $ 11,852 Loss from operations (38,237 ) (11,600 ) Other income (expense), net Interest income 73 87 Loss on extinguishment of debt (700 ) — Interest expense and other, net (467 ) (66 ) Change in estimated fair value of preferred unit warrant (371 ) 655 Loss before income taxes (39,702 ) (10,924 ) Income tax expense (81 ) (23 ) Net loss and comprehensive loss $ (39,783 ) $ (10,947 ) Net loss attributable to non-controlling interest (36,641 ) (10,947 ) Net loss attributable to Rani Therapeutics Holdings, Inc. $ (3,142 ) $ — Contract Revenue Contract revenue was $2.7 million and $0.3 million for the nine months ended September 30, 2021 and 2020, respectively, which was attributable to the evaluation agreement with Takeda. In 2021, $0.7 million of revenue related to the timing of work performed under the agreement. In May 2021, we received notice from Takeda as to their intent to terminate the contract for convenience. The termination of the contract was considered a modification of the arrangement, and the deferred revenue remaining of $2.0 million under this agreement was fully recognized in the second quarter of 2021. Research and Development Expenses The following table reflects our research and development costs by nature of expense (in thousands): Nine Months Ended September 30, 2021 2020 Payroll, equity-based compensation and related benefits $ 15,139 $ 4,652 Facilities, materials and supplies 2,541 1,745 Third-party services 1,172 2,243 Other 213 68 Total $ 19,065 $ 8,708 Research and development expenses were $19.1 million for the nine months ended September 30, 2021, compared to $8.7 million for the nine months ended September 30, 2020. The change in research and development expense was attributed to an increase of $3.4 million in salaries and related benefit costs due to higher headcount, equity-based compensation of $6.9 million attributed to the vesting and recognition of the Profits Interests expense in connection with the IPO and Organizational Transactions, and additional compensation as a result of a modification of certain Profits Interests, and an increase in laboratory supplies of $0.7 million, partially 34 offset by a reduction in third-party services of $1.1 million for the development of our manufacturing processes that occurred in 2020 and did not recur in 2021. General and Administrative Expenses General and administrative expenses were $21.9 million for the nine months ended September 30, 2021, compared to $3.1 million for the nine months ended September 30, 2020. During the nine months ended September 30, 2021, our equity-based compensation expense increased by $12.5 million attributed to the vesting and recognition of the Profits Interests expense in connection with the IPO and Organizational Transactions, and additional compensation as a result of a modification of certain Profits Interests, professional and consulting services expense increased by $3.1 million primarily due to the costs associated with preparing to operate as a public company, and our payroll and related benefits increased by $2.0 million due to higher headcount, facility costs increased $0.8 million to support the higher headcount, and travel costs increased $1.0 million. Other Income (Expense), Net Other expense, net was $1.5 million for the nine months ended September 30, 2021, which primarily related to $0.7 million of loss on the extinguishment of debt in July 2021, $0.5 million of interest expense on the debt, and $0.4 million due to the increase in the estimated fair value of the Series E preferred unit warrants prior to their conversion. Other income, net, for the nine months ended September 30, 2020 was primarily due to the change in estimated fair value of the Series B preferred unit warrants. Liquidity and Capital Resources Source of Liquidity Since our inception in 2012, we have not generated any revenue from commercial product sales and have incurred significant operating losses and negative cash flows from operations. We have not yet commercialized any products, and we do not expect to generate revenue from sales of commercial products for several years, if at all. We anticipate that we will continue to incur net losses for the foreseeable future. Since our inception, we have devoted substantially all of our resources on organizing and staffing our company, business planning, research and development activities, including the RaniPill platform design, drug formulation, preclinical studies, clinical trials, manufacturing automation and scale up, establishing our intellectual property portfolio, and providing general and administrative support for these operations. To date, we have financed our operations primarily through an IPO, private placements of our preferred units and the issuance of convertible promissory notes, with aggregate gross proceeds of $282.4 million, as well as revenue generated from evaluation agreements. As of September 30, 2021, we had cash and cash equivalents of $129.7 million. In August 2021, we raised net proceeds of $73.6 million from the IPO. In April 2020, we received loan proceeds in the amount of approximately $1.3 million under the Paycheck Protection Program, established pursuant to the CARES Act, with Comerica Bank as the lender (the “PPP Loan”). We have used this loan for eligible purposes, including payroll, benefits, rent and utilities. The loan bore interest at 1.0% per annum. In September 2021, the Company repaid in full the $1.3 million of principal and interest related to the PPP Loan. In September 2020, we entered into a secured convertible loan agreement (the “Avenue Loan Agreement”) with Avenue Venture Opportunities Fund, L.P., for loan proceeds of up to $10.0 million. As of September 30, 2021, we had drawn down $3.0 million under the Avenue Loan Agreement. The Loan bore interest at a variable rate per annum equal to the sum of (i) the greater of (A) the Prime Rate and (B) three and one-quarter percent (3.25%), plus (ii) eight percent (8.00%), compounded monthly until its maturity date of September 1, 2023, at which time all outstanding principal and interest became due and payable in cash if not already converted. Our obligations under the Avenue Loan Agreement were secured by a first priority security interest in substantially all of our assets. In connection with the Avenue Loan Agreement, we issued warrants of 118,929 units of Series E preferred units (the "Series E Warrants"). The Series E Warrants were exercisable for a period of seven years from the date of grant at an exercise price of $7.1471 per unit. The loan was convertible at the option of the holder into our Series E convertible preferred units. In July 2021, we repaid in full the $3.0 million of principal and approximately $0.5 million of final payment and fees under the Avenue Loan Agreement. In October 2020, we entered into the Fourth Amended and Restated Operating Agreement, which authorized the sale and issuance of up to 10,493,767 Series E Preferred Units. As of September 30, 2021, we had issued the total authorized amount at a price of $7.1471 for gross proceeds of $75.0 million. In conjunction with the IPO and Organizational Transactions the Series E warrants were settled with 62,877 shares of the Company's Class A common stock. After completion of the IPO, the Company became a holding company and has no material assets other than its ownership of LLC Interests. The Company has no independent means of generating revenue. The limited liability company agreement of Rani LLC that went into effect at the closing the IPO provides that certain distributions will be made to cover the taxes of the owners of 35 LLC Interests and the Company's obligations under the Tax Receivable Agreement which was entered into with certain of the Continuing LLC Owners. Tax Receivable Agreement We entered into a Tax Receivable Agreement with certain of the Continuing LLC Owners in August 2021 in connection with the IPO. The Tax Receivable Agreement provides for our payment to certain of the Continuing LLC Owners of 85% of the amount of tax benefits, if any, that we are deemed to realize as a result of any basis adjustments and certain other tax benefits arising from payments under the Tax Receivable Agreement. We will have in effect an election under Section 754 of the Code effective for each taxable year in which a redemption or exchange (including deemed exchange) of LLC Interests for shares of our Class A common stock or cash occurs. These Tax Receivable Agreement payments are not conditioned upon any continued ownership interest in either the Company or Rani LLC by such Continuing LLC Owners. The rights of such Continuing LLC Owners under the Tax Receivable Agreement are assignable to transferees of their LLC Interests (other than the Company as transferee pursuant to subsequent redemptions (or exchanges) of the transferred LLC Interests). We expect to benefit from the remaining 15% of tax benefits, if any, that we may realize. Due to the uncertainty of various factors, we cannot precisely quantify the tax benefits we may realize as a result of LLC Interest exchanges and the resulting amounts we may need to pay out to certain of the Continuing LLC Owners pursuant to the Tax Receivable Agreement; however, we estimate that such payments may be substantial. As there have been no transactions which have occurred which would trigger a liability under this agreement, we have not recognized any deferred tax assets or liabilities related to this agreement as of September 30, 2021. Future Funding Requirements Based on our current operating plan, we estimate that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next twelve months. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with the development of the RaniPill capsule and because the extent to which we may enter into strategic collaborations or other arrangements with third parties for development of the RaniPill capsule is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. To date, we have not generated any commercial product revenue. We do not expect to generate any commercial product revenue unless and until we obtain regulatory approval and commercialize any of our commercial product candidates, and we do not know when, or if at all, that will occur. We will continue to require additional capital to develop our product candidates and fund operations for the foreseeable future. Our primary uses of cash are to fund our operations, which consist primarily of research and development expenses related to our programs, manufacturing automation and scaleup, and general and administrative expenses. We expect our expenses to continue to increase in connection with our ongoing activities as we continue to advance the RaniPill capsule. In addition, we expect to incur additional costs operating as a public company. We may seek to raise capital through equity offerings or debt financings, collaboration agreements, or other arrangements with other companies, or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed could have a negative impact on our consolidated financial condition and our ability to pursue our business strategies. We anticipate that we will need to raise substantial additional capital, the requirements of which will depend on many factors, including:  the progress, costs, trial design, results of and timing of our preclinical studies and clinical trials;  the progress, costs, and results of our research pipeline;  the willingness of the U.S. Food and Drug Administration (“FDA"), or other regulatory authorities to accept data from our clinical trials, as well as data from our completed and planned clinical trials and preclinical studies and other work, as the basis for review and approval of the RaniPill capsule for various indications;  the outcome, costs, and timing of seeking and obtaining FDA, and any other regulatory approvals;  the number and characteristics of product candidates that we pursue;  our ability to manufacture sufficient quantities of the RaniPill capsules;  our need to expand our research and development activities;  the costs associated with manufacturing our product candidates, including establishing commercial supplies and sales, marketing, and distribution capabilities; 36  the costs associated with securing and establishing commercial infrastructure;  the costs of acquiring, licensing, or investing in businesses, product candidates, and technologies;  our ability to maintain, expand, and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense, and enforcement of any patents or other intellectual property rights;  our need and ability to retain key management and hire scientific, technical, business, and engineering personnel;  the effect of competing drugs and product candidates and other market developments;  the timing, receipt, and amount of sales from our potential products, if approved;  our ability to establish strategic collaborations;  our need to implement additional internal systems and infrastructure, including financial and reporting systems;  security breaches, data losses or other disruptions affecting our information systems;  the economic and other terms, timing of and success of any collaboration, licensing, or other arrangements which we may enter in the future; and  the effects of disruptions to and volatility in the credit and financial markets in the United States and worldwide from the COVID-19 pandemic. If we raise additional capital through debt financing, we may be subject to covenants that restrict our operations including limitations on our ability to incur liens or additional debt, pay dividends, make certain investments, and engage in certain merger, consolidation, or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us. If we raise funds through collaborations, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, reduce, or terminate some or all of our development programs and clinical trials. In addition, our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic. Cash Flows The following table summarizes our cash flows for the periods presented (in thousands): Nine Months Ended September 30, 2021 2020 Net cash used in operating activities $ (20,796 ) $ (8,260 ) Net cash used in investing activities (235 ) (944 ) Net cash provided by financing activities 77,716 4,035 Net increase (decrease) in cash and cash equivalents $ 56,685 $ (5,169 ) Operating Activities Net cash used in operating activities for the nine months ended September 30, 2021 was $20.8 million, which was primarily attributable to a net loss and comprehensive loss of $39.8 million, partially offset by the equity-based compensation expense of $19.4 million, loss on the extinguishment of the debt of $0.7 million, non-cash depreciation and amortization of $0.4 million, and change in the estimated fair value of our preferred unit warrant liability of $0.4 million. Additionally there was an increase of $2.5 million in prepaid expenses and other assets, a decrease in accrued expenses of $2.3 million, and a decrease in deferred revenue of $2.7 million. Net cash used in operating activities for the nine months ended September 30, 2020 was $8.3 million, which was primarily attributable to a net loss of $10.9 million, partially offset by the change in the estimated fair value of our preferred unit warrant liability of $0.7 million, non-cash depreciation and amortization of $0.4 million, a decrease in accounts payable of $1.9 million, the payment of the related party payable balance of $1.6 million, and an increase in deferred revenue of $2.7 million. 37 Investing Activities For the nine months ended September 30, 2021, net cash used in investing activities was $0.2 million, consisting solely of purchases of property and equipment. For the nine months ended September 30, 2020, net cash used in investing activities was $0.9 million, consisting solely of purchases of property and equipment. Financing Activities For the nine months ended September 30, 2021, cash provided by financing activities was approximately $77.7 million, consisting of the proceeds from the issuance of Class A common stock sold in the IPO for net proceeds of $74.2 million, the sale and issuance of 884,276 units of our Series E Preferred Units for net proceeds of $6.3 million, and $1.7 million of principal payments received from our related party notes receivable, partially offset by repayment of the PPP Loan of $1.3 million and repayment of the convertible loan of $3.3 million. For the nine months ended September 30, 2020, cash provided by financing activities was approximately $4.0 million, consisting of proceeds from the PPP Loan of $1.3 million and proceeds from the issuance of the convertible loan for net proceeds of $2.7 million. Critical Accounting Policies, Significant Judgments and Use of Estimates This discussion and analysis of financial condition and results of operation is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of expenses during the reporting period. On an ongoing basis, management evaluates its estimates and assumptions. Our critical accounting policies and estimates are discussed in the Prospectus. There have been no material changes in the Company’s critical accounting policies or estimates from those set forth in the Prospectus. Off-Balance Sheet Arrangements During the periods presented we did not have, nor do we currently have, any off-balance sheet arrangements as defined under the rules of the SEC. Recently Adopted Accounting Standards For a description of the expected impact of recent accounting pronouncements, see “Note 2. Summary of Significant Accounting Policies” in the “Notes to Condensed Consolidated Financial Statements” contained in Part I, Item 1 of this Quarterly Report on Form 10-Q. Other Information JOBS Act Accounting Election We are an “emerging growth company” within the meaning of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The JOBS Act permits an emerging growth company like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We are electing to use this extended transition period and we will therefore comply with new or revised accounting standards on the earlier of (i) when they apply to private companies; or (ii) when we lose our emerging growth company status. As a result, our financial statements may not be comparable with companies that comply with public company effective dates for accounting standards. We also rely on other exemptions provided by the JOBS Act, including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act unless we cease to be an emerging growth company. We will remain an emerging growth company until the earliest of (1) December 31, 2026 (the last day of the fiscal year following the fifth anniversary of the closing of our initial public offering), (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (3) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if 38 the market value of our Class A common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. Item 3. Quantit ative and Qualitative Disclosures About Market Risk. We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item. Item 4. C ontrols and Procedures. Evaluation of Disclosure Controls and Procedures Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(e) and 15(d)-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2021. Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the three months ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Inherent Limitations on Effectiveness of Controls Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost–effective control system, misstatements due to error or fraud may occur and not be detected. 39 PART II—OTHE R INFORMATION Ite m 1. Legal Proceedings. From time to time, we may become involved in litigation or other legal proceedings. We are not currently a party to any litigation or legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. Ite m 1A. Risk Factors. Summary of Risk Factors Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the SEC before making investment decisions regarding our Class A common stock. See “Special Note Regarding Forward-Looking Statements.” Unless we state otherwise or the context otherwise requires, the terms “we,” “us,” and “our,” and similar references in this Section “Risk Factors” and in Part II – Other Information refers to Rani Therapeutics Holdings, Inc. and its consolidated subsidiaries, Rani Therapeutics, LLC and Rani Management Systems, Inc.  We have a very limited operating history, have incurred operating losses since our inception and expect to incur significant losses for the foreseeable future. We may never generate any revenue or become profitable or, if we achieve profitability, we may not be able to sustain it.  We are an early clinical stage biopharmaceutical company with no approved products and no historical commercial product revenue, which makes it difficult to assess our future prospects and financial results.  If we are unable to raise additional capital when needed on acceptable terms, we may be forced to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations.  We are early in our development efforts and have only one product candidate, RT-101, the RaniPill capsule containing octreotide, in early clinical development. All of our other product candidates are still in preclinical development. If we are unable to advance our product candidates through clinical development, obtain regulatory approval and ultimately commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed.  Clinical development is a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results. Clinical failure can occur at any stage of clinical development. Further, we have never conducted a Phase 2 or Phase 3 clinical trial or submitted an application for marketing authorization.  As an organization, we recently completed our first Phase 1 clinical trial, have not submitted an investigational new drug application (“IND”) to the FDA and we have never conducted later-stage clinical trials or submitted a Biologics License Application ("BLA"), and may be unable to do so for any of our product candidates.  Because we have multiple product candidates in our clinical pipeline and are considering a variety of target indications, we may expend our limited resources to pursue a particular product candidate and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.  Product candidates comprising a biologic within the RaniPill capsule employ novel technologies that have not yet been approved by the FDA or comparable foreign regulatory authorities, and we anticipate that our applications will have to be submitted as original, standalone BLAs. These regulatory authorities have limited experience in evaluating our technologies and product candidates. Our novel technologies also make it difficult to predict the time and cost of product candidate development.  We have limited clinical data on our product candidates to indicate whether they are safe or effective for long-term use in humans.  We have conducted and may in the future conduct clinical trials for current or future product candidates outside the United States, and the FDA and comparable foreign regulatory authorities may not accept data from such trials.  The COVID-19 pandemic could adversely impact our business including our ongoing and planned preclinical studies and clinical trials. 40  We face significant competition from other biotherapeutics and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.  Our future success depends on our ability to retain our executive officers and to attract, retain and motivate highly qualified personnel. If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.  Our commercial success may depend in part on our ability to build and maintain our intellectual property portfolio.  We are a holding company and our principal asset is our interest in Rani. Accordingly, we will depend on distributions from Rani to pay our taxes, expenses (including payments under the Tax Receivable Agreement) and dividends. Rani’s ability to make such distributions may be subject to various limitations and restrictions.  Rani may make distributions of cash to us substantially in excess of the amounts we use to make distributions to our stockholders and pay our expenses (including our taxes and payments under the Tax Receivable Agreement). To the extent we do not distribute such excess cash as dividends on our Class A common stock, the Continuing LLC Owners would benefit from any value attributable to such cash as a result of their ownership of Class A common stock upon an exchange or redemption of their LLC Interests.  The multi-class structure of our common stock has the effect of concentrating voting control, which will limit your ability to influence the outcome of important transactions, including a change in control.  Our principal stockholders and management own a significant percentage of our stock and are able to exert significant control over matters subject to stockholder approval and may prevent other stockholders from influencing significant corporate decisions. Risk Factors Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks described below, including our consolidated financial statements and related notes, before investing in our Class A common stock. While we believe that the risks and uncertainties described below are the material risks currently facing us, additional risks that we do not yet know of or that we currently think are immaterial may also arise and materially affect our business. If any of the following risks materialize, our business, financial condition and results of operations could be adversely affected. In that case, the trading price of our Class A common stock could decline. You should consider all of the risk factors described when evaluating our business. Risks Related to Our Limited Operating History, Financial Position and Capital Requirements We have a very limited operating history, have incurred operating losses since our inception and expect to incur significant losses for the foreseeable future. We may never generate any revenue or become profitable or, if we achieve profitability, we may not be able to sustain it. Biologics delivery is a highly speculative undertaking and involves a substantial degree of risk. We are an early clinical stage biopharmaceutical company with a very limited operating history upon which you can evaluate our business and prospects. We were formed in 2012, and to date, we have devoted the majority of our resources to research and development, manufacturing automation and scaleup, and establishing our intellectual property portfolio. RT-101, our most advanced product candidate, is in early clinical development, while our other product candidates remain in the formulation and preclinical development. We have not yet demonstrated an ability to successfully complete pivotal clinical trials, obtain regulatory approvals, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, any predictions made about our future success or viability may not be as accurate as they could be if we had a history of successfully developing and commercializing biologics delivery products. We have incurred significant operating losses since our formation in 2012. Our net loss and comprehensive loss for the year ended December 31, 2020 and the nine months ended September 30, 2021 was approximately $16.7 million and $39.8 million, respectively, of which $3.1 million was attributable to Rani Therapeutics Holdings, Inc. for the nine months ended September 30, 2021. As of September 30, 2021, we had an accumulated deficit of $3.1 million. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders, deficit and working capital. The majority of our losses have resulted from expenses incurred in connection with research and development, manufacturing automation and scaleup, and establishing our intellectual property portfolio. All of our product candidates will require substantial additional development time and resources before we would be able to apply for or receive regulatory approvals and begin generating revenue from product sales. We expect to continue incurring significant research, development, manufacturing and other expenses related to our ongoing business operations and product development, and as a result, we expect to continue incurring losses for the foreseeable future. We also expect these losses to increase as we continue our development of, and seek regulatory approvals for, our product candidates. 41 We do not anticipate generating revenue from sales of products for the foreseeable future, if ever, and our product candidates are in preclinical and early stage clinical trials. If any of our product candidates fail in preclinical studies or clinical trials or do not gain regulatory approval, or even if approved, fail to achieve market acceptance, we may never become profitable. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Failure to become and remain profitable may adversely affect the market price of our Class A common stock and our ability to raise capital and continue operations. If one or more of our product candidates is approved for commercial sale and we retain commercial rights, we anticipate incurring significant costs associated with manufacturing and commercializing such approved product. Therefore, even if we are able to generate revenue from the sale of any approved product, we may never become profitable. We are an early clinical stage biopharmaceutical company with no approved products and no historical commercial product revenue, which makes it difficult to assess our future prospects and financial results. We are an early clinical stage biopharmaceutical company with a limited operating history upon which you can evaluate our business and prospects. Biologics development, especially as it relates to biologic-device combination products, is a highly speculative undertaking and involves a substantial degree of uncertainty. Our operations to date have been limited to developing our technology and undertaking preclinical studies and early clinical trials of our product candidates, which consist of investigational biologics delivered via the RaniPill capsule. We completed a Phase 1 clinical trial of our most advanced product candidate, RT-101, in Australia, and have completed preclinical studies of other product candidates. We plan to initiate Phase 1 clinical trials of certain of these product candidates in 2022 and in 2023. As an early clinical stage company, we have not yet demonstrated an ability to generate revenue or successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields such as biologics development and delivery. Consequently, the ability to accurately assess our future operating results or business prospects is significantly more limited than if we had a longer operating history or approved products on the market. We expect that our financial condition and operating results will fluctuate significantly from period to period due to a variety of factors, many of which are beyond our control, including, but not limited to:  the clinical outcomes from the continued development of our product candidates;  occurrence of adverse events or serious adverse events in preclinical studies or clinical trials of our product candidates;  potential side effects of our product candidates, whether caused by the biologic formulation or the RaniPill capsule, that could delay or prevent approval or cause an approved product to be taken off the market;  our ability to obtain, as well as the timeliness of obtaining, additional funding to develop, and potentially manufacture and commercialize our product candidates;  our ability to manufacture our product candidates to our specifications and in a timely manner to support our preclinical studies and clinical trials, and, if approved, commercialization;  our ability to scale, optimize and expand automation of our manufacturing processes for our product candidates for the conduct of preclinical studies and clinical trials and, if approved, for successful commercialization;  competition from existing products directed against the same biologic target or therapeutic indications of our product candidates as well as new products that may receive marketing approval;  the timing of regulatory review and approval of our product candidates;  market acceptance of our product candidates that receive regulatory approval, if any, including perception of the safety and efficacy of the oral delivery of biologics;  our ability to expand our commercial reach by selectively entering into strategic partnerships on favorable terms or at all;  our ability to establish an effective sales and marketing infrastructure directly or through collaborations with third parties; 42  the ability of patients or healthcare providers to obtain coverage or sufficient reimbursement for our products;  our ability to manufacture our product candidates in accordance with current Good Manufacturing Practices ("cGMP"), for the conduct of preclinical studies and clinical trials and, if approved, for successful commercialization;  our ability as well as the ability of any third-party collaborators, to obtain, maintain and protect intellectual property rights covering our product candidates and technologies, and our ability to develop, manufacture and commercialize our product candidates without infringing on the intellectual property rights of others;  our ability to add infrastructure and adequately manage our future growth; and  our ability to attract and retain key personnel with appropriate expertise and experience to manage our business effectively. Accordingly, the likelihood of our success must be evaluated in light of many potential challenges and variables associated with a clinical stage biopharmaceutical company, many of which are outside of our control, and past results, including operating or financial results, should not be relied on as an indication of future results. If we are unable to raise additional capital when needed on acceptable terms, we may be forced to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations. Our operations have consumed substantial amounts of cash since our inception. We conducted a Phase 1 clinical trial of RT-101 in healthy volunteers, conducted or are in the process of conducting preclinical studies of other product candidates, and are preparing to conduct Phase 1 clinical trials of certain of these product candidates, which we plan to initiate in 2022. In addition, our initial goal is to evaluate the safety of the RaniPill capsule, independent of any biologic. Developing biologic product candidates, including conducting preclinical studies and clinical trials, and developing the RaniPill platform, is expensive. We will require substantial additional future capital in order to complete the development of the RaniPill platform, expand our manufacturing capabilities, and seek regulatory approval thereof, and to complete the clinical development of our intended biologics for use within the RaniPill capsule and, if we are successful, to commercialize any of our current product candidates. If the FDA or any comparable foreign regulatory authorities, such as the EMA, require that we perform studies or trials in addition to those that we currently anticipate with respect to the development of our product candidates or any of our future product candidates, or repeat studies or trials, our expenses would further increase beyond what we currently expect, and any delay resulting from such further or repeat studies or trials could also result in the need for additional financing. Based on our current operating plan, we estimate that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next 12 months. This period could be shortened if there are any significant increases beyond our expectations in spending on development programs or more rapid progress of development programs than anticipated. Our existing capital resources, including the net proceeds from our IPO, will not be sufficient to enable us to initiate any pivotal clinical trials. Accordingly, we expect that we will need to raise substantial additional funds in the future in order to complete the development of the RaniPill platform and seek regulatory approval thereof, to complete the clinical development of our intended biologics for use within the RaniPill capsule, to expand our manufacturing capabilities and to commercialize any of our product candidates. Our funding requirements and the timing of our need for additional capital are subject to change based on a number of factors, including:  the progress, costs, trial design, results of and timing of our preclinical studies and clinical trials;  the progress, costs, and results of our research pipeline;  the willingness of the FDA or other regulatory authorities to accept data from our clinical trials, as well as data from our completed and planned preclinical studies and clinical trials and other work, as the basis for review and approval of the RaniPill capsule for various indications;  the outcome, costs, and timing of seeking and obtaining FDA, and any other regulatory approvals;  the number and characteristics of product candidates that we pursue;  our ability to manufacture sufficient quantities of the RaniPill capsules; 43  our need to expand our research and development activities;  the costs associated with manufacturing our product candidates, including establishing commercial supplies and sales, marketing, and distribution capabilities;  the costs associated with securing and establishing commercial infrastructure;  the costs of acquiring, licensing, or investing in businesses, product candidates, and technologies;  our ability to maintain, expand, and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense, and enforcement of any patents or other intellectual property rights;  our need and ability to retain key management and hire scientific, technical, business, and engineering personnel;  the effect of competing drugs and product candidates and other market developments;  the timing, receipt, and amount of sales from our potential products, if approved;  our ability to establish strategic collaborations;  our need to implement additional internal systems and infrastructure, including financial and reporting systems;  security breaches, data losses or other disruptions affecting our information systems;  the economic and other terms, timing of and success of any collaboration, licensing, or other arrangements which we may enter in the future; and  the effects of disruptions to and volatility in the credit and financial markets in the United States and worldwide from the COVID-19 pandemic. Additional funding may not be available to us on acceptable terms, or at all. As a result of the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, and uncertainty about economic stability. If we are unable to obtain additional funding from equity offerings or debt financings, including on a timely basis, we may be required to:  seek collaborators for one or more of our product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available;  relinquish or license on unfavorable terms our rights to technologies or product candidates that we otherwise would seek to develop or commercialize ourselves; or  significantly curtail one or more of our research or development programs or cease operations altogether. Conducting preclinical studies and clinical trials is a time consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain regulatory approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for our current or future operating plans. 44 Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our product candidates or technologies. We may seek additional funding through a combination of equity offerings, debt financings, collaborations and/or licensing arrangements. Additional funding may not be available to us on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, current stockholders’ interest will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of existing stockholders. The incurrence of indebtedness and/or the issuance of certain equity securities could result in fixed payment obligations and could also result in certain additional restrictive covenants, such as limitations on our ability to incur debt and/or issue additional equity, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. In addition, the issuance of additional equity securities by us, or the possibility of such issuance, may cause the market price of our Class A common stock to decline. In the event that we enter into collaborations and/or licensing arrangements in order to raise capital, we may be required to accept unfavorable terms, including relinquishing or licensing to a third party on unfavorable terms our rights to the RaniPill capsule or our product candidates that we otherwise would seek to develop or commercialize ourselves or potentially reserve for future potential arrangements when we might be able to achieve more favorable terms. Risks Related to the Development and Regulatory Approval of Our Product Candidates We are early in our development efforts and have only one product candidate, RT-101, in early clinical development. All of our other product candidates are still in preclinical development. If we are unable to advance our product candidates through clinical development, obtain regulatory approval and ultimately commercialize our product candidates, or experience significant delays in doing so, our business will be materially harmed. We are in the early stages of our development efforts and have only one product candidate, RT-101, in early clinical development. Our initial goal is to evaluate the safety of the RaniPill capsule, independent of any biologic, through a clinical trial conducted under an IDE. Any delays or setback in the clinical testing of the RaniPill capsule independent of any biologic, could delay or prevent the clinical testing of any of our current or future product candidates. We completed a Phase 1 clinical trial of RT-101, the RaniPill capsule containing octreotide, in Australia to evaluate safety as a primary endpoint and bioavailability as a secondary endpoint. Our other product candidates are still in the formulation and preclinical stages. We intend to initiate Phase 1 clinical trials for certain of these product candidates in 2022 and in 2023. We will need to progress these product candidates through IND-enabling studies and submit INDs to the FDA prior to initiating their clinical development. None of our product candidates have advanced into a pivotal study. Our ability to generate product revenues, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of our product candidates. The success of our product candidates will depend on several factors, including the following:  successful enrollment in clinical trials and completion of preclinical studies and clinical trials with favorable results;  acceptance of INDs by the FDA or similar regulatory filings by comparable foreign regulatory authorities for the conduct of clinical trials of our product candidates and our proposed design of future clinical trials;  demonstrating safety and efficacy to the satisfaction of applicable regulatory authorities;  receipt of marketing approvals from applicable regulatory authorities, including New Drug Applications ("NDAs"), from the FDA, and maintaining such approvals;  establishing clinical and commercial manufacturing capabilities;  expanding automation of our manufacturing machinery and procedures;  establishing and maintaining multiple suppliers for our critical manufacturing materials;  establishing sales, marketing and distribution capabilities and launching commercial sales of our products, if and when approved, whether alone or in collaboration with others;  establishing and maintaining patent and trade secret protection or regulatory exclusivity for our product candidates;  maintaining an acceptable safety profile and shelf life of our products following approval; 45  the class of drugs that are included in our product candidates continuing to represent the standard-of-care for the respective disease target and continuing to have a long-term favorable safety profile; and  maintaining and growing an organization of people who can develop our products and technology. The success of our business, including our ability to finance our company and generate any revenue in the future, will depend on the successful development, regulatory approval and commercialization of our product candidates, which may never occur. We have not yet succeeded and may not succeed in demonstrating efficacy and safety for any product candidates in clinical trials or in obtaining marketing approval thereafter. We may not be able to successfully deliver the biologic payload to the intestinal wall with great enough certainty to achieve adequate efficacy or safety for any of our product candidates or to the satisfaction of the FDA or other regulatory bodies. Given our early stage of development, it may be several years, if at all, before we have demonstrated the safety and efficacy of a treatment sufficient to warrant approval for commercialization. If we are unable to develop, or obtain regulatory approval for, or, if approved, successfully commercialize our product candidates, we may not be able to generate sufficient revenue to continue our business. The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed. Our business and future profitability is substantially dependent on our ability to successfully develop, obtain regulatory approval for and then successfully commercialize the RaniPill capsule with oral versions of multiple biologics. Our approach presents a novel method of delivering biologics directly into the intestinal wall, and we are not permitted to market or promote any of our product candidates before we receive regulatory approval from the FDA or any comparable foreign regulatory authorities. The pathway for obtaining regulatory approval for our approach has not been definitively established, and we may never receive such regulatory approval for any of our product candidates. The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable, typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of regulatory authorities. Approval policies, regulations and the types and amount of clinical and manufacturing data necessary to gain approval may change during the course of clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate and it is possible that none of our existing product candidates or any product candidates we have in development or may seek to develop in the future will ever obtain regulatory approval. Our product candidates could fail to receive regulatory approval for many reasons, including the following:  the FDA 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 or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication;  the results of clinical trials may fail to achieve the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;  we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;  the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data submitted in support of regulatory approval;  the data collected from preclinical studies and clinical trials of our product candidates may not be sufficient to support the submission of a BLA or other regulatory submissions necessary to obtain regulatory approval in the United States or elsewhere;  we may not meet the cGMP and other applicable requirements for manufacturing processes, procedures, documentation and facilities necessary for approval by the FDA or comparable foreign regulatory authorities; and  changes to the approval policies or regulations of the FDA or comparable foreign regulatory authorities with respect to our product candidates may result in our clinical data becoming insufficient for approval. 46 The lengthy regulatory approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approval to market the RaniPill capsule with our core programs and any other biologics, which would harm our business, results of operations and prospects significantly. In addition, even if we were to obtain regulatory approval, regulatory authorities may approve our product candidates for fewer or more limited indications than what we requested approval for, may include safety warnings or other restrictions that may negatively impact the commercial viability of our product candidates, including the potential for a favorable price or reimbursement at a level that we would otherwise intend to charge for our products. Likewise, regulatory authorities may grant approval contingent on the performance of costly post-marketing clinical trials, which could significantly reduce the potential for commercial success or viability of our product candidates. Any of the foregoing possibilities could materially harm the prospects for our product candidates and business and operations. We have not previously submitted a BLA, an MAA, or any corresponding drug approval filing to the FDA or any comparable foreign regulatory authorities for any product candidate. Further, our product candidates may not receive regulatory approval even if we complete such filing. If we do not receive regulatory approvals for our product candidates, we may not be able to continue our operations. Clinical development is a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results. Clinical failure can occur at any stage of clinical development. Further, we have never conducted a Phase 2 or Phase 3 clinical trial or submitted an application for marketing authorization. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical development process. The results of preclinical studies and early clinical trials of our product candidates and studies and trials of other products may not be predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. For example, the results generated to date in preclinical studies and the Phase 1 clinical trial of RT-101 do not ensure that future Phase 2 or later clinical trials of RT-101 will have similar results or be successful. In our Phase 1 clinical trial of RT-101, we tested the RaniPill capsule in a limited number of healthy volunteers. While we have not observed any serious adverse events as a result of these preclinical studies or clinical trial, we have not widely tested the RaniPill capsule in humans and cannot be certain how the RaniPill capsule will perform when more widely tested in humans in any later clinical trials. In addition to our ongoing and planned preclinical studies and clinical trials, we expect to have to complete at least two large scale, or adequate, well-controlled trials to demonstrate substantial evidence of efficacy and safety for each product candidate we intend to commercialize. Further, given the patient populations for which we are developing biologics, we expect to have to evaluate long-term exposure to establish the safety of our biologics in a chronic dose setting. We have never conducted a Phase 2 or Phase 3 clinical trial or submitted a BLA or comparable marketing application to foreign regulatory authorities, and as a result, we have no history or track-record to rely on when entering these phases of the development cycle. Furthermore, we are currently optimizing the formulation for RT-101, to enable once daily dosing. If we are able to optimize the formulation, we plan to test and verify the formulation in appropriate animal models. Once the formulation is validated in preclinical studies, we plan to submit an IND and initiate clinical trials for the development of RT-101. The scale-up development related to this formulation could delay commencement of such clinical trials, and the revised formulation could cause RT-101 to perform differently than the original formulation and affect the results of our planned clinical trials. Clinical trial failures may result from a multitude of factors including, but not limited to, flaws in trial design, dose and formulation selection, placebo effect, patient enrollment criteria and failure to demonstrate favorable safety and/or efficacy traits of the product candidate. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Based upon negative or inconclusive results, we may decide, or regulators may require us, to conduct additional preclinical studies or clinical trials. We may experience delays in ongoing clinical trials, and we do not know whether planned clinical trials will begin on time, need to be redesigned, enroll patients on time or be completed on schedule, if at all. Clinical trials can be delayed for a variety of reasons, including delays related to:  obtaining regulatory approvals to commence a clinical trial;  fraud or negligence on the part of consultants or contractors;  obtaining Institutional Review Board ("IRB"), or Ethics Committee ("EC") approval at each site;  recruiting suitable patients to participate in a clinical trial; 47  having patients complete a clinical trial or return for post-treatment follow-up;  clinical sites deviating from the clinical trial’s protocol or dropping out of a clinical trial;  the impacts of the COVID-19 pandemic on our ongoing and planned preclinical studies and clinical trials;  adding new clinical trial sites; or  manufacturing sufficient quantities of product candidate for use in our preclinical studies and clinical trials, including product candidates manufactured in accordance with our specifications. In addition, disruptions caused by the COVID-19 pandemic may increase the likelihood that we encounter such difficulties or delays in initiating, enrolling, conducting, or completing our ongoing and planned clinical trials. We could encounter delays if a clinical trial is modified, suspended or terminated by us, by the IRBs or ECs of the institutions in which such clinical trials are being conducted, by a Data Safety Monitoring Board for such trial or by the FDA or comparable foreign regulatory authorities. Such authorities may impose a modification, suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical trial protocols, inspection of the clinical trial operations or clinical trial site by the FDA or comparable foreign regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. If we experience delays in the completion of, or termination of, any clinical trial of our product candidates, the commercial prospects of our product candidates will be harmed and our ability to generate product revenue from any of these product candidates will be delayed. Any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenue. Any of these occurrences may harm our business, financial condition and prospects significantly. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates. In addition, data obtained from trials and studies are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may delay, limit or prevent regulatory approval. Further, if patients drop out of our clinical trials, miss scheduled doses or follow-up visits, or otherwise fail to follow clinical trial protocols, whether as a result of the COVID-19 pandemic, actions taken to slow the spread of COVID-19 or otherwise, the integrity of data from our clinical trials may be compromised or not accepted by the FDA or comparable foreign regulatory authorities, which would represent a significant setback for the applicable program. For the foregoing reasons, our ongoing and planned preclinical studies and clinical trials may not be successful. Any safety concerns observed in any one of our clinical trials in our targeted or contemplated biologic indications could limit the prospects for regulatory approval of our product candidates in those and other indications, which could have an adverse effect on our business, financial condition and results of operations. Any difficulties or delays in the commencement or completion, or termination or suspension, of our current or planned clinical trials could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects. Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. We are in the early stages of our development efforts and have only one product candidate, RT-101, in early clinical development. We completed a Phase 1 clinical trial of RT-101 to evaluate safety as a primary endpoint and bioavailability as a secondary endpoint. Our other product candidates are still in the formulation or preclinical stages. We intend to initiate Phase 1 clinical trials for certain of these product candidates in 2022 and in 2023. However, we have not, to date, submitted an IND for any of our product candidates. We will be required to submit applicable equivalent regulatory filings to foreign regulatory authorities to the extent we initiate clinical trials outside of the United States. We do not know whether our planned clinical trials will begin on time or be completed on schedule, if at all. The commencement and completion of clinical trials can be delayed for a number of reasons, including delays related to:  the FDA or comparable foreign regulatory authorities disagreeing with the design or implementation of our clinical trials; 48  obtaining regulatory authorizations to commence a trial, or reaching a consensus with regulatory authorities on trial design;  any failure or delay in reaching an agreement with CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;  obtaining approval from one or more IRBs;  IRBs refusing to approve, suspending or terminating the trial at an investigational site, precluding enrollment of additional volunteers or withdrawing their approval of the trial;  changes to clinical trial protocol;  clinical sites deviating from trial protocol or dropping out of a trial;  manufacturing sufficient quantities of a product candidate or obtaining sufficient quantities of other therapies or APIs for use in clinical trials;  volunteers failing to enroll or remain in our trial at the rate we expect, or failing to return for post-treatment follow-up;  volunteers choosing an alternative treatment for the indication for which we are developing our product candidates, or participating in competing clinical trials;  lack of adequate funding to continue the clinical trial;  volunteers experiencing severe or unexpected drug-related adverse effects;  occurrence of serious adverse events in clinical trials of the same class of agents conducted by other companies;  selection of clinical endpoints that require prolonged periods of clinical observation or analysis of the resulting data;  a facility manufacturing our product candidates or any of their components being ordered by the FDA or comparable foreign regulatory authorities to temporarily or permanently shut down due to violations of cGMP regulations or other applicable requirements, or infections or cross-contaminations of product candidates in the manufacturing process;  any changes to our manufacturing process or product formulation that may be necessary or desired;  shortages in, or delays in obtaining, raw materials for manufacturing our product candidates or adequately scaling our manufacturing processes and procedures to deliver sufficient quantities for use in our clinical trials;  third-party clinical investigators losing the licenses or permits necessary to perform our clinical trials, not performing our clinical trials on our anticipated schedule or consistent with the clinical protocol or relevant regulatory requirements;  third-party contractors not performing data collection or analysis in a timely or accurate manner; or  third-party contractors becoming debarred or suspended or otherwise penalized by the FDA or other government or comparable foreign regulatory authorities for violations of regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or all of the data produced by such contractors in support of our marketing applications. We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by a Data Safety Monitoring Board for such trial or by the FDA or comparable foreign regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or comparable foreign regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or 49 adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. In addition, changes in regulatory requirements and policies may occur, and we may need to amend clinical trial protocols to comply with these changes. Amendments may require us to resubmit our clinical protocols to IRBs for reexamination, which may impact the costs, timing or successful completion of a clinical trial. Further, conducting clinical trials in foreign countries, as we may do for our product candidates, presents additional risks that may delay completion of our clinical trials. These risks include the failure of enrolled patients in foreign countries to adhere to clinical protocol as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, as well as political and economic risks relevant to such foreign countries. Moreover, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA or comparable foreign regulatory authorities. The FDA or comparable foreign regulatory authorities may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the study. The FDA or comparable foreign regulatory authorities may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA or comparable foreign regulatory authorities, as the case may be, and may ultimately lead to the denial of marketing approval of one or more of our product candidates. In addition, we work with third parties to manufacture, develop, and supply the biologic payloads for inclusion in the RaniPill capsule, a development process that is lengthy and expensive. Some of the active ingredients we are utilizing in our development and used by other sponsors to make biosimilars in the United States, and others are not. We and our third party manufacturers may discover, even late in the process, that a particular biologic payload does not demonstrate the necessary characteristics or is unacceptable to the FDA or other regulatory authorities, and we may be forced to abandon such manufacturing and development efforts for such compound and pursue alternative sourcing, or conduct additional, more involved development work to be able to use such compound, which could have an adverse effect on our operations. If we experience delays in the completion of, or termination of, any clinical trial of our product candidates, the commercial prospects of our product candidates will be harmed, and our ability to generate product revenues from any of these product candidates will be delayed. Moreover, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. In addition, many of the factors that cause, or lead to, termination or suspension of, or a delay in the commencement or completion of, clinical trials may also ultimately lead to the denial of regulatory approval of a product candidate. We may make formulation or manufacturing changes to our product candidates, in which case we may need to conduct additional preclinical studies or clinical trials to bridge our modified product candidates to earlier versions. Any delays to our clinical trials that occur as a result could shorten any period during which we may have the exclusive right to commercialize our product candidates and our competitors may be able to bring products to market before we do, and the commercial viability of our product candidates could be significantly reduced. Any of these occurrences may harm our business, financial condition and prospects significantly. Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside our control. We may encounter delays in enrolling, or be unable to enroll or maintain, a sufficient number of patients to complete any of our clinical trials. Patient enrollment and retention in clinical trials is a significant factor in the timing of clinical trials and depends on many factors, including the size and nature of the patient population, the nature of the trial protocol, the existing body of safety and efficacy data with respect to the study drug, the number and nature of competing treatments and ongoing clinical trials of competing drugs for the same indication, the proximity of patients to clinical trial sites and the eligibility criteria for the clinical trial. For example, we are developing RT-108 for the treatment of hemophilia A, a rare bleeding disorder with limited patient populations from which to draw volunteers in clinical trials. We will be required to identify and enroll a sufficient number of patients with hemophilia A for each of our ongoing and planned clinical trials of RT-108. Potential patients for RT-108 may not be adequately diagnosed or identified with the disease we are targeting or may not meet the entry criteria for our trials. For example, some patients with hemophilia A may seek liver transplants early and as a result become ineligible for our treatment. Additionally, other pharmaceutical companies targeting this same bleeding disorder are recruiting clinical trial patients from these patient populations, which may delay or make it more difficult to fully enroll our clinical trials. For most of our product candidates, we are working to deliver known biologic products via the RaniPill platform, and accordingly, patients who are currently prescribed or eligible to be prescribed the approved injectable versions of these biologics may be unable or unwilling to participate in our clinical trials to test an unapproved delivery system of these medications. Our inability to enroll a sufficient number of patients for any of our current or future clinical trials would result in significant delays or may require us to abandon one or more clinical trials altogether. 50 Furthermore, any negative results we may report in clinical trials of our product candidates may make it difficult or impossible to recruit and retain patients in other clinical trials of that same candidate. Also, negative results in clinical trials by other companies regarding the biologics we are using or biosimilars or analogs thereof can additionally make it difficult or impossible to recruit and retain patients in our clinical trials. Delays or failures in planned patient enrollment or retention may result in increased costs, program delays or both, which could have a harmful effect on our ability to develop our product candidates, or could render further development impossible. Our preclinical studies and clinical trials have been affected and may in the future be affected by the COVID-19 pandemic, such as by a reduction in staffing at a CRO, a pause in clinical trial patient enrollment to focus on, and direct resources to, COVID-19, or patients choosing not to enroll or continue participating in a clinical trial as a result of the pandemic. For example, we are developing RT-106 and RT-103 as an oral version of basal insulin and GLP-1 mimetic, respectively, for the treatment of Type 2 diabetes. According to the Centers for Disease Control and Prevention, people who have Type 2 diabetes are at higher risk of getting severely ill from COVID-19. As a result, potential patients in contemplated clinical trials may choose to not enroll, not participate in follow-up clinical visits or drop out of the trial as a precaution against contracting COVID-19 if not vaccinated. Further, some patients may not be able or willing to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services. Our product candidates or similar investigational or approved drugs may cause undesirable side effects or have other properties impacting safety that could delay or prevent the regulatory approval of, limit the commercial profile of an approved label for, or result in limiting the commercial opportunity for our product candidates if approved. Undesirable side effects that may be caused by our product candidates or caused by similar investigational or approved drugs within the same class by other companies, could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or adverse events related to our product candidates. In such an event, our clinical trials could be suspended or terminated, and the FDA or comparable foreign regulatory authorities could order us to cease further development of our product candidates for any or all targeted biologic indications. For example, in our Phase 1 clinical trial of RT-101, the RaniPill capsule was well tolerated by all subjects, and no subjects had difficulty swallowing the pill. Capsule remnants were passed by all trial subjects and no serious adverse events were observed. However, we have generated limited clinical data with the RaniPill capsule to date, and further analysis may reveal adverse events inconsistent with the safety profile observed to date. Drug-related side effects could negatively affect patient recruitment or the ability of enrolled patients to complete the trial and even if our clinical trials are completed and our product candidate is approved, drug-related side effects could restrict the label or result in potential product liability claims. Any of these occurrences could significantly harm our business, financial condition and prospects. Moreover, since our product candidates are being developed for indications for which subcutaneous and IV injectable pharmaceuticals have been approved, we expect that our clinical trials would need to show a risk/benefit profile that is competitive with those existing products and product candidates in order to obtain regulatory approval or, if approved, a product label that is favorable for commercialization. In addition, similar investigational or approved drugs within the same class as our product candidates may encounter serious adverse events. In the event these products encounter serious adverse events, the FDA may remove the class of drugs from the market, impose a class wide REMS, or require other class wide regulatory requirements. We may face increased regulatory scrutiny and ultimately may have to abandon our product candidate of the same class, which would have an adverse effect on our business, financial condition and operations. Additionally, if one or more of our product candidates receives marketing approval and we or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including:  regulatory authorities may withdraw approvals of such product;  regulatory authorities may require additional warnings on the label;  we may be required to create a medication guide outlining the risks of such side effects for distribution to patients; 51  we could be sued and held liable for harm caused to patients; and  our reputation may suffer. Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate which could significantly harm our business and prospects. As an organization, we recently completed our first Phase 1 clinical trial, have not submitted an IND to the FDA and we have never conducted later-stage clinical trials or submitted a BLA, and may be unable to do so for any of our product candidates. We are early in our development efforts for our product candidates, and we will need to successfully complete later-stage and pivotal clinical trials in order to obtain FDA or comparable foreign regulatory approval to market our current or any future product candidates. Carrying out later-stage clinical trials and the submission of a successful BLA is a complicated process. As an organization, we recently completed our first Phase 1 clinical trial for RT-101 conducted in Australia and have not yet conducted any clinical trials for our other product candidates. We have not previously conducted any later stage or pivotal clinical trials, have limited experience as a company in preparing, submitting and prosecuting regulatory filings and have not previously submitted a BLA or other comparable foreign regulatory submission for any product candidate. We also plan to conduct a number of clinical trials for multiple product candidates in parallel over the next several years. For example, we plan to initiate two clinical trials in 2022. This may be a difficult process to manage with our limited resources and may divert the attention of management. In addition, we have had limited interactions with the FDA, through the pre-submission process with the Center for Devices and Radiological Health (CDRH), and we have never filed an IDE or IND. Although we plan to engage with FDA’s Center for Drug Evaluation and Research (CDER) and/or Center for Biologics Evaluation and Research (CBER) to request guidance on our clinical development plan, we have not done so, to date, and we cannot be certain how many clinical trials of our product candidates will be required or how such trials will have to be designed. For example, we anticipate relying on data developed on the RaniPill platform to enable shortened or more efficient development for our subsequent product candidates, but this may not be the case and the FDA or other regulatory authorities may require us to perform a full suite of studies for each of our product candidates. Consequently, we may be unable to successfully and efficiently commence, execute and complete necessary clinical trials in a way that leads to regulatory submission and approval of any of our product candidates. We may require more time and incur greater costs than our competitors and may not succeed in obtaining regulatory approvals of product candidates that we develop. Failure to commence or complete, or delays in, our planned clinical trials, could prevent us from or delay us in submitting BLAs for and commercializing our product candidates. Our product candidates are subject to extensive regulation and compliance, which is costly and time consuming, and such regulation may cause unanticipated delays or prevent the receipt of the required approvals to commercialize our product candidates. The clinical development, manufacturing, labeling, storage, record-keeping, advertising, promotion, import, export, marketing and distribution of our product candidates are subject to extensive regulation by the FDA in the United States and by comparable foreign regulatory authorities in foreign markets. In the United States, we are not permitted to market our product candidates until we receive regulatory approval from the FDA. The process of obtaining regulatory approval is expensive, often takes many years following the commencement of clinical trials and can vary substantially based upon the type, complexity and novelty of the product candidates involved, as well as the target indications and patient population. 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 and the ability to hire and retain key personnel and accept the payment of user fees. In addition, approval policies or regulations may change, and the FDA has substantial discretion in the approval process, including the ability to delay, limit or deny approval of a product candidate for many reasons. Despite the time and expense invested in clinical development of product candidates, regulatory approval is never guaranteed. Prior to obtaining approval to commercialize a product candidate in the United States or abroad, we must demonstrate with substantial evidence from adequate and well-controlled clinical trials, and to the satisfaction of the FDA or comparable foreign regulatory authorities, that such product candidates are safe and effective for their intended uses. Results from nonclinical studies and clinical trials can be interpreted in different ways. Even if we believe the nonclinical or clinical data for our product candidates are promising, such data may not be sufficient to support approval by the FDA and comparable foreign regulatory authorities. The FDA or comparable foreign regulatory authorities, as the case may be, may also require us to conduct additional preclinical studies or clinical trials for our product candidates either prior to or post-approval, or may object to elements of our clinical development program. 52 The FDA or comparable foreign regulatory authorities can delay, limit or deny approval of a product candidate for many reasons, including:  such authorities may disagree with the design or implementation of our clinical trials;  negative or ambiguous results from our clinical trials or results may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;  serious and unexpected drug-related side effects may be experienced by participants in our clinical trials or by individuals using drugs similar to our product candidates;  the population studied in the clinical trial may not be sufficiently broad or representative to assure safety in the full population for which we seek approval;  such authorities may not accept clinical data from trials which are conducted at clinical facilities or in countries where the standard of care is potentially different from that of the United States;  we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;  such authorities may disagree with our interpretation of data from preclinical studies or clinical trials;  such authorities may not agree that the data collected from clinical trials of our product candidates are acceptable or sufficient to support the submission of a BLA or other submission or to obtain regulatory approval in the United States or elsewhere, and such authorities may impose requirements for additional preclinical studies or clinical trials;  such authorities may disagree regarding the formulation, labeling and/or the specifications of our product candidates;  approval may be granted only for indications that are significantly more limited than what we apply for and/or with other significant restrictions on distribution and use;  such authorities may find deficiencies in the manufacturing processes or facilities of our third-party manufacturers with which we contract for clinical and commercial supplies;  regulations of such authorities may significantly change in a manner rendering our or any of our potential future collaborators’ clinical data insufficient for approval; or  such authorities may not accept a submission due to, among other reasons, the content or formatting of the submission. With respect to foreign markets, approval procedures vary among countries and, in addition to the foregoing risks, may involve additional product testing, administrative review periods and agreements with pricing authorities. In addition, events raising questions about the safety of certain marketed biologics may result in increased cautiousness by the FDA and comparable foreign regulatory authorities in reviewing new biologics based on safety, efficacy or other regulatory considerations and may result in significant delays in obtaining regulatory approvals. Any delay in obtaining, or inability to obtain, applicable regulatory approvals would prevent us from commercializing our product candidates. Because we have multiple product candidates in our clinical pipeline and are considering a variety of target indications, we may expend our limited resources to pursue a particular product candidate and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success. Because we have limited financial and managerial resources, we focus on specific product candidates, indications and development programs. We also plan to conduct several clinical trials for our product candidates in parallel over the next several years, including potentially initiating two clinical trials across our product candidates in 2022, which may make our decision as to which product candidates to focus on more difficult. As a result, we may forgo or delay pursuit of opportunities with other product candidates or other indications that could have had greater commercial potential or likelihood of success. In addition, we are focused on developing the RaniPill capsule in addition to the biologic formulations for use in the RaniPill capsule. While we intend to focus on well-characterized molecules with attractive commercial characteristics, focusing both on biologics delivery and formulation will require substantial resource and attention. In addition, we may identify other target payloads that are larger than the current capacity of the RaniPill capsule and we would need to redesign and conduct additional preclinical and clinical studies of any future design of the 53 RaniPill capsule. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through future collaborations, licenses and other similar arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate. Additionally, we may pursue additional in-licenses or acquisitions of development-stage assets or programs, which entails additional risk to us. Identifying, selecting and acquiring promising product candidates requires substantial technical, financial and human resources expertise. Efforts to do so may not result in the actual acquisition or license of a particular product candidate, potentially resulting in a diversion of our management’s time and the expenditure of our resources with no resulting benefit. For example, if we are unable to identify programs that ultimately result in approved products, we may spend material amounts of our capital and other resources evaluating, acquiring and developing products that ultimately do not provide a return on our investment. A breakthrough therapy designation or Fast Track designation by the FDA for a drug may not lead to a faster development or regulatory review or approval process, and it would not increase the likelihood that the drug will receive marketing approval. In the future, we may seek a breakthrough therapy designation for one or more of our product candidates. A breakthrough therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For drugs that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Drugs designated as breakthrough therapies by the FDA are also eligible for priority review if supported by clinical data at the time of the submission of the biologics license application. Designation as a breakthrough therapy is at the discretion of the FDA. Accordingly, even if we believe that one of our product candidates meets the criteria for designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of a breakthrough therapy designation for a drug may not result in a faster development process, review, or approval compared to drugs considered for approval under conventional FDA procedures and it would not assure ultimate approval by the FDA. In addition, even if one or more of our product candidates qualify as breakthrough therapies, the FDA may later decide that the product candidates no longer meets the conditions for qualification, or it may decide that the time period for FDA review or approval will not be shortened. We may seek Fast Track designation for some of our product candidates. If a therapy is intended for the treatment of a serious or life-threatening condition and the therapy demonstrates the potential to address significant unmet medical needs for this condition, the drug sponsor may apply for Fast Track designation. The FDA has broad discretion whether or not to grant this designation, and even if we believe a particular product candidates is eligible for this designation, the FDA may not decide to grant it. Even if we do receive Fast Track designation, we may not experience a faster development process, review, or approval compared to conventional FDA procedures. If our clinical development program does not continue to meet the criteria for Fast Track designation, or if our clinical trials are delayed, suspended, or terminated, or put on clinical hold due to unexpected adverse events or issues with clinical supply, we will not receive the benefits associated with the Fast Track program. Furthermore, Fast Track designation and priority review do not change the standards for approval. The FDA may withdraw Fast Track designation if it believes that the designation is no longer supported by data from our clinical development program. Fast Track designation alone does not guarantee qualification for the FDA’s priority review procedures. Interim, topline and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data. From time to time, we may publicly disclose interim, topline or preliminary data from our clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, topline data should be viewed with caution until the final data are available. From time to time, we may also disclose interim data from our clinical studies. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Adverse 54 differences between preliminary or interim data and final data could significantly harm our business prospects. Further, others, including regulatory authorities, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular drug, drug candidate or our business. If the topline data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition. Product candidates comprising a biologic within the RaniPill capsule employ novel technologies that have not yet been approved by the FDA or comparable foreign regulatory authorities, and we anticipate that our applications will have to be submitted as original, standalone BLAs. These regulatory authorities have limited experience in evaluating our technologies and product candidates. Our novel technologies also make it difficult to predict the time and cost of product candidate development. We and our collaboration partners are developing product candidates based on novel technologies, and we intend to work closely with our collaboration partners to understand and deliver the requisite demonstration of safety and efficacy that the FDA and comparable foreign regulatory authorities may seek for the approval of our product candidates, which comprise a biologic within the RaniPill capsule. It is possible that the regulatory approval process may take significant time and resources and require deliverables from independent third parties not under our control. We anticipate that our marketing applications to the FDA will have to be submitted as 351(a) BLAs. For some of our product candidates, the regulatory approval path and requirements may not be clear or may change, which could add significant delay and expense. For example, although we have engaged in pre-submission meetings with FDA’s CDRH regarding our planned evaluation of the RaniPill platform under an IDE, we have not yet engaged in formal interactions with CDER or CBER to obtain FDA feedback on the clinical trials that will be necessary to support BLA submissions for any of our product candidates. Delays or failure to obtain regulatory approval of any of the products that we or our collaboration partners develop using our novel technologies would adversely affect our business. In addition, we are in the early stages of developing our platform and any development problems we experience in the future may cause significant delays or unanticipated costs, and such development problems may not be able to be overcome. We may also experience delays in developing a sustainable, reproducible and scalable manufacturing process or transferring that process to commercial partners, which may prevent us from completing our clinical trials or commercializing our products on a timely or profitable basis, if at all. In addition, our expectations with regard to our scalability and costs of manufacturing may vary significantly as we develop our product candidates and understand these critical factors. We have limited clinical data on our product candidates to indicate whether they are safe or effective for long-term use in humans. We have limited clinical data on our product candidates and we have not conducted any studies to evaluate whether they are safe or effective for long-term use in humans, including to evaluate the safety of any degradation products that may result after the drug is injected into the intestinal wall. In our Phase 1 clinical trial of RT-101, we tested the RaniPill capsule in a limited number of healthy volunteers. While we have not observed any serious adverse events as a result of these preclinical studies or clinical trial, we have not widely tested the RaniPill capsule in humans and cannot be certain how the RaniPill capsule will perform when more widely tested in humans in any later clinical trials. If treatment with any of our product candidates in our ongoing or future clinical trials results in concerns about their safety or efficacy, we and our collaboration partners may be unable to successfully develop or commercialize any or all of our product candidates or enter into collaborations with respect to our product candidates. We have conducted and may in the future conduct clinical trials for current or future product candidates outside the United States, and the FDA and comparable foreign regulatory authorities may not accept data from such trials. We have conducted and may in the future choose to conduct one or more clinical trials outside the United States. For example, we conducted a Phase 1 study of RT-101 in Australia. The acceptance of study data from clinical trials conducted outside the United States or another jurisdiction by the FDA or comparable foreign regulatory authority may be subject to certain conditions or may not be accepted at all. In cases where data from foreign clinical trials are intended to serve as the sole basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of foreign data alone unless (i) the data are applicable to the U.S. population and U.S. medical practice; (ii) the trials were performed by clinical investigators of recognized competence and pursuant to Good Clinical Practice regulations ("GCP"); and (iii) the data may be considered valid without the need for an on-site inspection by the FDA, or if the FDA considers such inspection to be necessary, the FDA is able to validate the data 55 through an on-site inspection or other appropriate means. In addition, even where the foreign study data are not intended to serve as the sole basis for approval, the FDA will not accept the data as support for an application for marketing approval unless the study is well-designed and well-conducted in accordance with GCP and the FDA is able to validate the data from the study through an onsite inspection if deemed necessary. Many foreign regulatory authorities have similar approval requirements. In addition, such foreign trials would be subject to the applicable local laws of the foreign jurisdictions where the trials are conducted. There can be no assurance that the FDA or any comparable foreign regulatory authority will accept data from trials conducted outside of the United States or the applicable jurisdiction. If the FDA or any comparable foreign regulatory authority does not accept such data, it would result in the need for additional trials, which could be costly and time-consuming, and which may result in current or future product candidates that we may develop not receiving approval for commercialization in the applicable jurisdiction. Risks Related to Commercialization of Our Product Candidates Even if we receive regulatory approval for any product candidate, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense. Additionally, our product candidates, if approved, could be subject to labeling and other restrictions on marketing or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our product candidates, when and if any of them are approved. If any of our product candidates are approved, they will be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping, conduct of post-marketing studies, and submission of safety, efficacy, and other post-market information, including both federal and state requirements in the United States and requirements of comparable foreign regulatory authorities. Manufacturers and manufacturers’ facilities are required to comply with extensive requirements imposed by the FDA and comparable foreign regulatory authorities, including ensuring that quality control and manufacturing procedures conform to cGMP regulations. As such, we and our contract manufacturers, if any, will be subject to continual review and inspections to assess compliance with cGMP and adherence to commitments made in any BLA or MAA. Accordingly, we and others with whom we work must continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, production, and quality control. Any regulatory approvals that we receive for our product candidates will be subject to limitations on the approved indicated uses for which the product may be marketed and promoted or to the conditions of approval (including the requirement to implement a risk evaluation and mitigation strategy), or contain requirements for potentially costly post-marketing testing. We will be required to report certain adverse reactions and production problems, if any, to the FDA and comparable foreign regulatory authorities. The FDA and other agencies, including the Department of Justice, closely regulate and monitor the post-approval marketing and promotion of products to ensure that they are manufactured, marketed, and distributed only for the approved indications and in accordance with the provisions of the approved labeling. We will have to comply with requirements concerning advertising and promotion for our products. The holder of an approved BLA or MAA must submit new or supplemental applications and obtain approval for certain changes to the approved product, product labeling, or manufacturing process. We could also be asked to conduct post-marketing clinical trials to verify the safety and efficacy of our products in general or in specific patient subsets. If original marketing approval was obtained via the accelerated approval pathway, we could be required to conduct a successful post-marketing clinical trial to confirm clinical benefit for our products. An unsuccessful post-marketing study or failure to complete such a study could result in the withdrawal of marketing approval. If a regulatory authority discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of a product, such regulatory authorities may impose restrictions on that product or us, including requiring withdrawal of the product from the market. If we fail to comply with applicable regulatory requirements, a regulatory authority or enforcement authority may, among other things:  issue warning letters that would result in adverse publicity;  impose civil or criminal penalties;  suspend or withdraw regulatory approvals;  suspend any of our ongoing clinical trials;  refuse to approve pending applications or supplements to approved applications submitted by us; 56  impose restrictions on our operations, including closing our contract manufacturers’ facilities;  seize or detain products; or  require a product recall. Any government investigation of alleged violations of law could require us to expend significant time and resources in response, and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenue from our products. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected. Even if our product candidates receive marketing approval, they may fail to achieve market acceptance by physicians, patients, government payors (including Medicare and Medicaid programs), private insurers, and other third-party payors, or others in the medical community necessary for commercial success. If any of our product candidates receive marketing approval, they may nonetheless fail to gain sufficient market acceptance by physicians, patients, government payors, other third-party payors and other healthcare providers. If any of our approved products fail to achieve an adequate level of acceptance, we may not generate significant revenue to become profitable. The degree of market acceptance, if approved for commercial sale, will depend on a number of factors, including but not limited to:  the potential or perceived advantages or disadvantages of the oral delivery of biologics as compared to subcutaneous or IV injections of biologics;  the efficacy of our product candidates compared to alternative treatments;  the shelf-life of our product candidates;  the effectiveness of sales and marketing efforts;  the cost of treatment in relation to alternative treatments;  our ability to offer our product candidates for sale at competitive prices;  the willingness of the target patient population to try the RaniPill capsule;  the class of drugs that are included in our product candidates continuing to represent the standard-of-care for the respective disease target and continuing to have a long-term favorable safety profile;  the willingness of physicians to prescribe use of the RaniPill capsule and to prescribe biologics that utilize the RaniPill capsule;  the willingness of the medical community to offer patients our product candidates in addition to or in the place of current subcutaneous and IV injectable therapies;  the strength of marketing and distribution support;  the availability of government and third-party coverage and adequate reimbursement;  our ability to manufacture sufficient supply to meet patients’ demand;  the prevalence and severity of any side effects; and  any restrictions on the use of our product candidates together with other medications or treatments. Because we expect sales of our product candidates, if approved, to generate revenue for us to achieve profitability, the failure of our product candidates to achieve market acceptance would harm our business and could require us to seek collaborations or undertake additional financings sooner than we would otherwise plan. 57 The FDA and comparable foreign regulatory authorities actively enforce the laws and regulations prohibiting the promotion of off-label uses. If we are found or alleged to have improperly promoted off-label uses, we may become subject to significant liability. The FDA and comparable foreign regulatory authorities strictly regulate the promotional claims that may be made about prescription products, as our product candidates would be, if approved. In particular, a product may not be promoted for uses that are not approved by the FDA or comparable foreign regulatory authorities as reflected in the product’s approved labeling. However, companies may share truthful and not misleading information that is otherwise consistent with a product’s FDA approved labeling. If we receive marketing approval for any one of our product candidates, physicians could prescribe such product to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may become subject to significant liability. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. If we become the target of such an investigation or prosecution based on our marketing and promotional practices, we could face similar sanctions, which would materially harm our business. In addition, management’s attention could be diverted from our business operations, significant legal expenses could be incurred, and our reputation could be damaged. The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. If we cannot successfully manage the promotion of our product candidates, if approved, we could become subject to significant liability, which would adversely affect our business and financial condition. The insurance coverage and reimbursement status of newly approved products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for our product candidates could limit our ability to generate revenue. The availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford medications and therapies. Sales of any of our product candidates that receive marketing approval will depend substantially, both in the United States and internationally, on the extent to which the costs of our product candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administration authorities, private health coverage insurers and other third-party payors. If reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain adequate pricing that will allow us to realize a sufficient return on our investment. Factors payors consider in determining reimbursement are based on whether the product is:  a covered benefit under its health plan;  safe, effective and medically necessary;  appropriate for the specific patient;  cost-effective; and  neither experimental nor investigational. There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, the principal decisions about reimbursement for new products are typically made by CMS, an agency within the United States Department of Health and Human Services. CMS decides whether and to what extent a new product will be covered and reimbursed under Medicare. Private payors tend to follow CMS to a substantial degree. It is difficult to predict what CMS will decide with respect to reimbursement for novel products such as ours since there is no body of established practices and precedents for these new products. Reimbursement agencies in Europe may be more conservative than CMS. Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada and other countries may cause us to price our product candidates on less favorable terms that we currently anticipate. In many countries, particularly the countries of the European Union, the prices of medical products are subject to varying price control mechanisms as part of national health systems. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidates to other available therapies. In general, the prices of products under such systems are substantially lower than in the United States. Other countries allow companies to fix their own prices for products, but monitor and control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in markets outside the United 58 States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits. Moreover, increasing efforts by governmental and third-party payors, in the United States and internationally, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for our product candidates. We expect to experience pricing pressures in connection with the sale of any of our product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products into the healthcare market. We face significant competition from other biotherapeutics and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively. The biotherapeutics and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. We have competitors worldwide, including major multinational pharmaceutical companies, biotherapeutics companies, specialty pharmaceutical and generic pharmaceutical companies as well as universities and other research institutions. Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff, and experienced marketing and manufacturing organizations. Mergers and acquisitions in our industry may result in even more resources being concentrated in our competitors. As a result, these companies may obtain regulatory approval more rapidly than we are able and may be more effective in selling and marketing their products. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Competition may increase further as a result of advances in the commercial applicability of newer technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing, on an exclusive basis, pharmaceutical products that are easier to develop, more effective or less costly than any product candidates that we are currently developing or that we may develop. Unforeseen technological advances to those of our technologies may be developed by these competitors. If approved, our product candidates are expected to face competition from commercially available drugs as well as drugs and devices that are in the development pipelines of our competitors. Pharmaceutical companies may invest heavily to accelerate discovery and development of novel technologies or to in-license novel technologies that could make our product candidates less competitive. In addition, any new product that competes with an approved product must demonstrate advantages in efficacy, convenience, tolerability or safety in order to overcome price competition and to be commercially successful. If our competitors succeed in obtaining FDA or comparable foreign regulatory approval before we do or develop blocking intellectual property to which we do not have a license, there would be a material adverse impact on the future prospects for our product candidates and business. We face competition primarily from current and future (generic and biosimilars) manufacturers of subcutaneous and IV injectable versions of our product candidates, such as AbbVie Inc., Eli Lilly and Company, Novartis AG, Roche Holdings AG and the SOMA and LUMI from the Novo Nordisk-MIT collaboration. Additionally, we face competition from companies that are pursuing the development and manufacture of oral biologics, including Oramed Pharmaceuticals, Inc., Entera Bio Ltd., Applied Molecular Transport Inc., Protagonist Therapeutics, Inc., Chiasma, Inc., and Novo Nordisk A/S. For example, Chiasma received FDA approval for an oral octreotide product, MYCAPSSA, in June 2020. We also face competition from gene and cell therapy companies. Further, our product candidates aim to treat chronic diseases. As a result, we also compete with curative therapies on the basis that they cure the chronic disease we are intending to treat. We believe that our ability to successfully compete will depend on, among other things:  the efficacy and safety of our product candidates, in particular compared to marketed products and products in late-stage development;  the time it takes for our product candidates to complete clinical development and receive regulatory approval, if at all;  the ability to commercialize and market any of our product candidates that receive regulatory approval;  the price of our products, including in comparison to branded or generic competitors; 59  whether coverage and adequate levels of reimbursement are available under private and governmental health insurance plans, including Medicare;  the ability to protect our intellectual property rights related to our product candidates;  the ability to avoid infringing on the intellectual property rights of others;  the ability to manufacture and sell commercial quantities of any of our product candidates that receive regulatory approval; and  acceptance of any of our product candidates, if approved, by payors, patients, and physicians and other healthcare providers, including perception of the safety and efficacy of the oral delivery of biologics. Because our research approach depends on our proprietary RaniPill platform, it may be difficult for us to continue to successfully compete in the face of rapid changes in technology. If we fail to continue to advance the RaniPill platform, technological change may impair our ability to compete effectively and technological advances or products developed by our competitors may render our technologies or product candidates obsolete, less competitive or not economical. We currently have no marketing and sales organization. To the extent any of our product candidates for which we maintain commercial rights is approved for marketing, if we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our product candidates, we may not be able to effectively market and sell any of our product candidates, or generate product revenue. We currently do not have a marketing or sales organization for the marketing, sales and distribution of biologics products. In order to commercialize any product candidates that receive marketing approval, we would have to build marketing, sales, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services, and we may not be successful in doing so. In the event of successful development of any of our product candidates, we may elect to build a targeted specialty sales force which will be expensive and time consuming. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization of these products. With respect to our product candidates, we may choose to partner 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 we are unable to enter into collaborations with third parties for the commercialization of approved products, if any, on acceptable terms or at all, or if any such partner does not devote sufficient resources to the commercialization of our products or otherwise fails in commercialization efforts, we may not be able to successfully commercialize any of our product candidates that receive regulatory approval. If we are not successful in commercializing our product candidates, either on our own or through collaborations with one or more third parties, our future revenue will be materially and adversely impacted. If the market opportunities for any product that we develop are smaller than we believe they are, our commercial revenue may be adversely affected and our business may suffer. Our projections of both the number of people who have the diseases we may be targeting, as well as the subset of people with these health issues who have the potential to benefit from treatment with our current and any of our future product candidates are based on our beliefs and estimates. For example, we are developing RT-101 for the treatment of acromegaly, for which we estimate the patient population is approximately 25,000 people in the United States as of November 2016, RT-102, an oral administration of parathyroid hormone (PTH) for the treatment of osteoporosis, for which we estimate the patient population is approximately 10.0 million in the United States as of 2018, and RT-105, an oral administration of TNF-alfa antibody for the treatment of psoriatic arthritis, for which we estimate the patient population is approximately 2.4 million in the United States as of March 2014. These estimates have been derived from a variety of sources, including scientific literature, surveys of clinics, patient foundations, or market research, and may prove to be incorrect. Further, new information may change the estimated incidence or prevalence of these diseases. The total addressable market across all of our product candidates will ultimately depend upon, among other things, the diagnosis criteria for indications included in the final label for each of our product candidates approved for sale for these indications, the availability of alternative treatments and the safety, convenience, cost and efficacy of our product candidates relative to such alternative treatments, acceptance by the medical community and patients, and patient access, drug pricing and reimbursement. The number of patients in the United States and other major markets and elsewhere may turn out to be lower than expected, patients may not be otherwise amenable to treatment with our products or new patients may become increasingly difficult to identify or gain access to, all of which would adversely affect our results of operations and our business. Even if we obtain significant market share for our products, if approved, if the potential target populations are small, we may never achieve profitability without obtaining regulatory approval for additional indications. 60 Additional time may be required to obtain regulatory approval for our product candidates because they are combination products. We believe our product candidates are biologic-device combination products that require coordination within the FDA and comparable foreign regulatory authorities for review of their device and biologic components. Although the FDA and comparable foreign regulatory authorities have systems in place for the review and approval of combination products such as ours, we may experience delays in the development and commercialization of our product candidates due to regulatory timing constraints and uncertainties in the product development and approval process. Even if we obtain and maintain approval for any of our product candidates from the FDA, we may never obtain approval for our product candidates outside of the United States, which would limit our market opportunities and adversely affect our business. Sales of our product candidates outside of the United States will be subject to foreign regulatory requirements governing clinical trials and marketing approval and, to the extent that we retain commercial rights following clinical development, we would plan to seek regulatory approval to commercialize our product candidates in the United States, the European Union and additional foreign countries. Even if the FDA grants marketing approval for a product candidate, comparable foreign regulatory authorities must also approve the manufacturing and marketing of that product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the United States, including additional preclinical studies or clinical trials. In many countries outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that country. In some cases, the price that we intend to charge for our products is also subject to approval. We may decide to submit an MAA to the EMA for approval in the EEA. As with the FDA, obtaining approval of an MAA from the EMA is a similarly lengthy and expensive process and the EMA has its own procedures for approval of product candidates. Even if a product is approved, the FDA or the EMA, as the case may be, may limit the indications for which the product may be marketed, require extensive warnings on the product labeling or require expensive and time-consuming clinical trials or reporting as conditions of approval. Foreign regulatory authorities in countries outside of the United States and the EEA also have requirements for approval of drug candidates with which we must comply prior to marketing in those countries. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. Further, clinical trials conducted in one country may not be accepted by comparable foreign regulatory authorities in other countries and regulatory approval in one country does not ensure approval in any other country, while a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory approval process in others. Also, regulatory approval for any of our product candidates may be withdrawn. If we fail to comply with the regulatory requirements in international markets or fail to receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed and our business will be adversely affected. Risks Related to Our Reliance on Third Parties We may not be successful in maintaining or obtaining formulation and manufacturing collaborations, and any potential partner may not devote sufficient resources to the formulation and manufacturing of our product candidates or may otherwise fail in formulation and manufacturing efforts, which could adversely affect our ability to develop certain of our product candidates and adversely affect our financial condition and operating results. In the past, we have entered into evaluation agreements with Takeda and certain other pharmaceutical companies concerning the formulation and manufacture of oral versions of Factor VIII and other molecules. We currently have no active evaluation agreements. Future evaluation agreements, and any additional collaborations entered into, may not ultimately be successful, which could have a negative impact on our business, results of operations, financial condition and growth prospects. While we plan to expand our reach by selectively entering into strategic partnerships, we may not be able to enter into such partnerships, and if we do, we may not be able to maintain significant rights or control of future development and commercialization of our product candidates. Accordingly, if we collaborate with a third party for development and commercialization of a product candidate, we may relinquish some or all of the control over the future success of that product candidate to the third party, and that partner may not devote sufficient resources to the formulation and manufacture of our product candidate or may otherwise fail in these efforts, in which event the formulation and manufacture of the product candidate in the collaboration could be delayed or terminated and our business could be substantially harmed. We believe our product candidates are biologic-device combination products that we anticipate will be regulated under the biologic regulations of the FDA based on its primary mode of action as a biologic. Third-party manufacturers may not be able to comply with the regulatory requirements, known as cGMP, applicable to biologic-device combination products, including applicable provisions of the FDA’s drug and biologics cGMP regulations, device cGMP requirements embodied in the medical device Quality System Regulations ("QSRs"), or similar regulatory requirements outside the United States. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product 61 candidates, operating restrictions and criminal prosecutions, any of which could significantly affect supplies of our product candidates. The facilities used by our contract manufacturers to manufacture our product candidates must be approved by the FDA pursuant to inspections that will be conducted after we submit any BLA to the FDA. In addition, the terms of any potential collaboration or other arrangement that we may establish may not be favorable to us or may not be perceived as favorable, which may negatively impact the price of our Class A common stock. In some cases, we may be responsible for continuing formulation of a product candidate under a collaboration, and the payments we receive from our partner may be insufficient to cover the cost of this formulation or may result in a dispute between the parties. Moreover, collaborations and sales and marketing arrangements are complex and time consuming to negotiate, document and implement and they may require substantial resources to maintain, which may be detrimental to the development of our other product candidates. We are subject to a number of additional risks associated with our dependence on collaborations with third parties, the occurrence of which could cause our collaboration arrangements to fail. Conflicts may arise between us and partners, such as conflicts concerning the implementation of development plans, efforts and resources dedicated to the product candidate, interpretation of clinical data, the achievement of milestones, the interpretation of financial provisions or the ownership of intellectual property developed during the collaboration. If any such conflicts arise, a collaborator could act in its own self-interest, which may be adverse to our interests. Any such disagreement between us and a partner could result in one or more of the following, each of which could delay or prevent the development or commercialization of our product candidates, and in turn prevent us from generating sufficient revenue to achieve or maintain profitability:  reductions in the payment of royalties or other payments we believe are due pursuant to the applicable collaboration arrangement;  actions taken by a partner inside or outside our collaboration which could negatively impact our rights or benefits under our collaboration; or  unwillingness on the part of a partner to keep us informed regarding the progress of its development and commercialization activities or to permit public disclosure of the results of those activities. In addition, the termination of a collaboration may limit our ability to obtain rights to the product or intellectual property developed by our collaborator under terms that would be sufficiently favorable for us to consider further development or investment in the terminated collaboration product candidate, even if it were returned to us. We rely on third parties to conduct our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties or do not meet regulatory requirements or expected deadlines, we may not be able to obtain timely regulatory approval for or commercialize our product candidates and our business could be substantially harmed. We have relied upon and plan to continue to rely upon third-party CROs to monitor and manage clinical trials and collect data during our preclinical studies and clinical programs. We rely on these parties for execution of our preclinical studies and clinical trials, and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that their conduct meets regulatory requirements and that each of our studies and trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on CROs does not relieve us of our regulatory responsibilities. Thus, we and our CROs are required to comply with GCPs, which are regulations and guidelines promulgated by the FDA and comparable foreign regulatory authorities for all of our product candidates in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may not accept the data or may require us to perform additional clinical trials before considering our filing for regulatory approval or approving our marketing application. We cannot assure you that upon inspection by a regulatory authority, such regulatory authority will determine that any of our clinical trials complies with GCPs. While we have agreements governing activities of our CROs, we may have limited influence over their actual performance and the qualifications of their personnel conducting work on our behalf. Failure to comply with applicable regulations in the conduct of the clinical studies for our product candidates may require us to repeat clinical trials, which would delay the regulatory approval process. Some of our CROs have an ability to terminate their respective agreements with us if it can be reasonably demonstrated that the safety of the volunteers participating in our clinical trials warrants such termination, if we make a general assignment for the benefit of our creditors or if we are liquidated. If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or do so on commercially reasonable terms. In addition, our CROs are not our employees, and except for remedies available to us under our agreements with such CROs, we cannot control whether or not they devote sufficient time and resources to 62 our preclinical and clinical programs. If CROs 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 clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, 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 our product candidates. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase substantially and our ability to generate revenue could be delayed significantly. Switching or adding additional CROs involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects. We depend on third-party suppliers for key materials used in our manufacturing processes as well as for the manufacturing of biosimilars and the loss of these third parties or their inability to supply us with adequate materials and biosimilars could harm our business. We rely on third-party suppliers for the supply of the raw materials and APIs required for the production of our product candidates, and we may to some extent rely on third-party manufacturers for the commercial supply of any of our product candidates for which we seek to obtain marketing approval. In addition, we work with third parties to manufacture and develop biologics for inclusion in the RaniPill capsule. Our dependence on these third parties and the challenges we may face in obtaining adequate supplies of raw materials, APIs and biosimilars involve several risks, including limited control over pricing, availability, quality, delivery schedules and non-exclusivity. As a small company, our negotiation leverage is limited, and we are likely to get lower priority than our competitors who are larger than we are. We do not have long-term supply agreements, and we purchase our required supplies on a development manufacturing services agreement or purchase order basis or the like. These third parties may not continue to provide us with the quantities of these materials that we require to satisfy our anticipated specifications and quality requirements. Any supply interruption in limited or sole sourced raw materials, APIs or biosimilars could materially harm our ability to manufacture our product candidates until a new source of supply, if any, could be identified and qualified. We may be unable to find a sufficient alternative supply channel in a reasonable time or on commercially reasonable terms. Any performance failure on the part of our suppliers could have an adverse effect on our business, financial condition and results of operations. We may seek to enter into collaborations, licenses and other similar arrangements and may not be successful in doing so, and even if we are, we may not realize the benefits of such relationships. We may seek to enter into, and have entered into, collaborations, joint ventures, licenses and other similar arrangements for the development or commercialization of our product candidates, due to capital costs required to develop or commercialize the product candidate or manufacturing constraints. We may not be successful in our efforts to establish or maintain such collaborations for our product candidates because our research and development pipeline may be insufficient, our product candidates may be deemed to be at too early of a stage of development for collaborative effort or third parties may not view our product candidates as having the requisite potential to demonstrate safety and efficacy or significant commercial opportunity. In addition, we face significant competition in seeking appropriate strategic partners, and the negotiation process can be time consuming and complex. Further, any future collaboration agreements may restrict us from entering into additional agreements with potential collaborators. Following a strategic transaction or license, we may not achieve an economic benefit that justifies such transaction. Even if we are successful in our efforts to establish such collaborations, the terms that we agree upon may not be favorable to us, and we may not be able to maintain such collaborations if, for example, development or approval of a product candidate is delayed, the safety of a product candidate is questioned or sales of an approved product candidate are unsatisfactory. In addition, any potential future collaborations may be terminable by our strategic partners, and we may not be able to adequately protect our rights under these agreements. Furthermore, strategic partners may negotiate for certain rights to control decisions regarding the development and commercialization of our product candidates, if approved, and may not conduct those activities in the same manner as we do. Any termination of collaborations that we may enter into in the future, or any delay in entering into collaborations related to our product candidates, could delay the development and commercialization of our product candidates and reduce their competitiveness if they reach the market, which could have a material adverse effect on our business, financial condition and results of operations. 63 Risks Related to Our Business and Industry Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance we may provide. Our quarterly and annual operating results may fluctuate significantly, which makes it difficult for us to predict our future operating results. These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to:  the timing, degree of success and cost of, and level of investment in, research, development, regulatory approval and commercialization activities relating to our product candidates, which may change from time to time;  coverage and reimbursement policies with respect to our product candidates, if approved, and potential future drugs that compete with our products;  the cost of manufacturing our product candidates, which may vary depending on the quantity of production;  expenditures that we may incur to acquire, develop or commercialize additional product candidates and technologies;  the level of demand for any approved products, which may vary significantly;  future accounting pronouncements or changes in our accounting policies; and  the timing and success or failure of preclinical studies or clinical trials for our product candidates or competing product candidates, or any other change in the competitive landscape of our industry, including consolidation among our competitors or partners. The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance. This variability and unpredictability could also result in our failing to meet the expectations of industry or financial analysts or investors for any period. If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated revenue or earnings guidance we may provide. We are heavily dependent on the success of our product candidates in our core programs, and if any of these product candidates fail to enter clinical trials, receive regulatory approval or are not successfully commercialized, our business would be adversely affected. We currently have no product candidates that are in late-stage clinical trials or are approved for commercial sale, and we may never be able to develop a marketable product. We have only one product candidate, RT-101, in clinical development. We expect that a substantial portion of our efforts and expenditures over the next few years will be devoted to the development of the RaniPill platform that is designed to enable the oral administration of a broad range of biologics used to treat multiple diseases and disorders. Our initial goal is to evaluate the safety of the RaniPill capsule independent of any biologic. The RaniPill capsule may not receive regulatory approval in connection with any biologic or, if approved, it may not be successfully commercialized. The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of the RaniPill capsule for the indications we are seeking will remain subject to extensive regulation by the FDA and comparable foreign regulatory authorities in the United States and other countries, each of which has differing regulations. In addition, even if approved, pricing and reimbursement will be subject to further review and discussions with payors. We are not permitted to market any product candidate in the United States until after approval of a BLA from the FDA, or a similar marketing authorization from comparable authorities in any foreign countries until after approval of a marketing application by corresponding foreign regulatory authorities. We completed a Phase 1 clinical trial of our most advanced product candidate, RT-101, and have completed preclinical studies of other product candidates. We plan to initiate Phase 1 clinical trials of certain product candidates in 2022 and in 2023. We will need to conduct larger, more extensive clinical trials in the target patient populations for these product candidates and their indications to support a potential application for regulatory approval by the FDA or corresponding foreign regulatory authorities, and we do not expect to be in a position to do so for the near term. We have not previously submitted a BLA to the FDA, or similar product approval filings to comparable foreign authorities, for any product candidate, and our product candidates may not be successful in clinical trials or receive regulatory approval. Filing an application and obtaining regulatory approval for a biologic product candidate is an extensive, lengthy, expensive 64 and inherently uncertain process, and the regulatory authorities may delay, limit or deny approval of our product candidates for many reasons, including:  we may not be able to demonstrate that any of our product candidates is safe and effective to the satisfaction of the FDA or comparable foreign regulatory authorities;  the FDA or comparable foreign regulatory authorities may require additional preclinical studies or clinical trials prior to granting approval, which would increase our costs and extend the pre-approval development process;  the results of our clinical trials may not meet the level of statistical or clinical significance required by the FDA or comparable foreign regulatory authorities for approval;  the FDA or comparable foreign regulatory authorities may disagree with the number, design, size, conduct or statistical analysis of one or more of our clinical trials;  the FDA or comparable foreign regulatory authorities may disagree with, or not accept, our interpretation of data from our preclinical studies and clinical trials;  the FDA or comparable foreign regulatory authorities may identify deficiencies in our manufacturing processes or facilities which would be required to be corrected prior to regulatory approval;  the success or further approval of competitor products approved in indications in which we undertake development of our product candidates may change the standard of care or change the standard for approval of our product candidate in our proposed indications; and  the FDA or comparable foreign regulatory authorities may change their approval policies or adopt new regulations. Our product candidates will require additional research, clinical development, manufacturing activities, regulatory approval in multiple jurisdictions (if regulatory approval can be obtained at all), securing sources of commercial manufacturing supply and building of or partnering with a commercial organization. Our planned clinical trials for the RaniPill platform may not be initiated or completed in a timely manner or successfully, or at all. Further we may not advance any other product candidates into clinical trials. Moreover, any delay or setback in the development of any product candidate would be expected to adversely affect our business and cause our stock price to fall. We may not be successful in our efforts to use and expand our proprietary RaniPill platform to build a pipeline of product candidates. A key element of our strategy is to leverage the RaniPill platform to expand our pipeline of product candidates and in order to do so, we must continue to invest in the RaniPill platform and development capabilities. Although our research and development efforts to date have resulted in a pipeline of our core product candidates, these product candidates may not be safe and effective and may not obtain regulatory approval. In addition, although we plan to develop the RaniPill platform to deliver a diverse pipeline of product candidates across multiple diseases and disorders, we may not prove to be successful at doing so. Furthermore, we may also find that the uses of the RaniPill platform are limited because alternative uses of our biologics prove not to be safe or effective. Even if we are successful in continuing to build our pipeline, the potential product candidates that we identify may not be suitable for clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval or achieve market acceptance. Even after approval, if we cannot successfully develop or commercialize our products, or if serious adverse events are discovered after commercialization, we will not be able to generate any product revenue, which would adversely affect business. Changes in regulatory requirements and guidance may also occur and we may need to amend clinical trial protocols submitted to applicable regulatory authorities to reflect these changes. Amendments may require us to resubmit clinical trial protocols to IRBs or ECs for re-examination, which may impact the costs, timing or successful completion of a clinical trial. The policies of the FDA and comparable foreign regulatory authorities may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our current or any of our future product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. 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 65 approval that we may have obtained, and we may not achieve or sustain profitability, which would harm our business, prospects, financial condition and results of operations. If we are required to conduct additional clinical trials or other preclinical studies with respect to our current or future product candidates, or if we are unable to successfully complete our preclinical studies or planned clinical trials, we may be delayed in obtaining regulatory approval of our current or any of our future product candidates, we may not be able to obtain regulatory approval at all or we may obtain approval for indications that do not provide a broad commercial opportunity. Our product development costs will also increase if we experience delays in testing or approvals, and we may not have sufficient funding to complete the testing and approval process for our current or any of our future product candidates. Significant clinical trial delays could allow our competitors to bring products to market before we do and impair our ability to commercialize our products if and when approved. If any of this occurs, our business would be harmed. All of our product candidates, except for RT-101, are in research or preclinical development and have not entered into clinical trials. If we are unable to develop, test and commercialize our product candidates, our business will be adversely affected. As part of our strategy, we seek to discover, develop and commercialize a portfolio of product candidates that deliver different biologics through the RaniPill capsule. Research programs to identify appropriate biological targets and product candidates require substantial scientific, technical, financial and human resources, whether or not any product candidates are ultimately identified. Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development for many reasons, including:  our financial and internal resources are insufficient;  our research methodology used may not be successful in identifying potential product candidates;  competitors may develop alternatives that render our product candidates uncompetitive;  our product candidates may be shown to have harmful side effects or other characteristics that indicate such product candidate is unlikely to be effective or otherwise unlikely to achieve applicable regulatory approval;  our product candidates may not be capable of being produced in commercial quantities at an acceptable cost, or at all; or  our product candidates may not be accepted by patients, the medical community, healthcare providers or third-party payors. Our proprietary RaniPill platform may not result in any products of commercial value. We have developed a proprietary platform designed to enable the administration of biologics previously only administrable by subcutaneous or IV injection, and this approach forms the basis of our overall development strategy for all of our product candidates. For multiple reasons, the RaniPill platform may not ultimately be commercially valuable, including:  the RaniPill platform may not work in conjunction with our targeted biologic indications or future indications to yield product candidates that can enter clinical development;  we may not be successful in our efforts to expand the applicability of the RaniPill platform beyond our current product pipeline;  we may not be able to enter into licensing or partnership agreements on suitable terms to obtain and develop oral versions of biologics; and  the medical community may not accept the RaniPill platform and physicians may not prescribe our products to patients, if approved. In addition, we have designed our platform to be drug-agnostic, which we believe could enable us to expand into additional markets beyond our current pipeline. While our research and development efforts support the use of the peptides and antibodies we have evaluated to date for inclusion in the RaniPill capsule, there could be molecules that are unable to be inserted in 66 the RaniPill capsule, whether as a result of payload capacity, mechanism of action, or otherwise, the result of which would significantly harm our product candidates’ commercial potential. Furthermore, the product candidates contemplated by our current product pipeline were designed with needles that have the ability to deliver 3.0 to 3.5mg of a biologic, which we refer to as payload capacity. We are aware of biologics that require a dose of nearly 100.0mg in order to be effective, such as oncology biologics and certain other cell therapies. While we plan to develop a needle with a payload capacity of up to 30.0mg, which could enable us to expand our platform to include additional molecules, we may still be precluded from using certain high load biologics for inclusion in the RaniPill capsule, which could adversely affect the commercial potential of the RaniPill platform. Additionally, to the extent we are able to develop a needle with a larger payload capacity, we may be required to conduct additional preclinical or clinical studies to establish performance characteristics of the updated design, and for regulatory authorities to permit evaluation of the updated design in human subjects. As a result of any one of these factors, our business, financial condition and results of operations could be adversely affected. If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of any of our product candidates, if approved. We face an inherent risk of product liability as a result of the clinical testing of our product candidates and will face an even greater risk if we commercialize any products. For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to stop development or, if approved, limit commercialization of our product candidates. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:  delay or termination of clinical studies;  injury to our reputation;  withdrawal of clinical trial participants;  initiation of investigations by regulators;  costs to defend the related litigation;  a diversion of management’s time and our resources;  substantial monetary awards to trial participants or patients;  decreased demand for our product candidates;  product recalls, withdrawals or labeling, marketing or promotional restrictions;  loss of revenue from product sales; and  the inability to commercialize any our product candidates, if approved. 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 development or commercialization of our product candidates. We currently carry $10.0 million in clinical trial liability insurance, which we believe is appropriate for our clinical trials. Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. 67 The manufacture and packaging of biologics is subject to FDA requirements and those of comparable foreign regulatory authorities. If we or our third-party manufacturers fail to satisfy these requirements, our product development and commercialization efforts may be harmed. The manufacture and packaging of biologics is regulated by the FDA and comparable foreign regulatory authorities and must be conducted in accordance with the FDA’s cGMP and comparable requirements of foreign regulatory authorities. There are a limited number of manufacturers that operate under these cGMP regulations who are both capable of manufacturing biologics and willing to do so. Failure by us or our third-party manufacturers to comply with applicable regulations or requirements could result in sanctions being imposed on us, including fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approval of our products, delays, suspension or withdrawal of approvals, seizures or voluntary recalls of product, operating restrictions and criminal prosecutions, any of which could harm our business. Our product candidates require aseptic manufacturing techniques that may present additional manufacturing challenges compared to other oral route of administration products. The same requirements and risks are applicable to the suppliers of the key raw material used to manufacture the active pharmaceutical ingredient ("API"), for the biologics of our product candidates. Manufacturers of combination products need to comply with both pharmaceutical cGMPs and medical device QSRs enforced by the FDA through its facilities inspection programs. These requirements include, among other things, quality control, quality assurance and the maintenance of records and documentation. Manufacturers of our product candidates may be unable to comply with these cGMP and QSR requirements and with other FDA and foreign regulatory requirements. A failure to comply with these requirements may result in fines and civil penalties, suspension of production, suspension or delay in product approval, product seizure or recall, or withdrawal of product approval. If the safety of any of our product candidates is compromised due to failure to adhere to applicable laws or for other reasons, we may not be able to successfully commercialize such product candidate, and we may be held liable for any injuries sustained as a result. Any of these factors could cause a delay in the commercialization of our product candidates, entail higher costs or even prevent us from effectively commercializing our product candidates. Changes in the manufacturing process or procedure, including a change in the location where the product is manufactured or a change of a third-party manufacturer, may require prior FDA review and approval of the manufacturing process and procedures in accordance with the FDA’s cGMPs and QSRs. Any new facility is subject to a pre-approval inspection by the FDA and would again require us to demonstrate product comparability to the FDA. We would also need to verify, such as through a manufacturing comparability study, that any new manufacturing process would produce our product candidate according to the specifications previously submitted to the FDA, and there are comparable foreign requirements. The delays associated with the verification of a new third party manufacturer could negatively affect our ability to develop product candidates or commercialize our products in a timely manner or within budget. This review may be costly and time consuming and could delay or prevent the launch of a product. Furthermore, in order to obtain approval of our product candidates by the FDA and comparable foreign regulatory authorities, we will be required to consistently produce our formulation of the API, and the finished product in commercial quantities and of specified quality on a repeated basis and document our ability to do so. This requirement is referred to as process validation. Each of our potential API suppliers will likely use a different method to manufacture API, which has the potential to increase the risk to us that our manufacturers will fail to meet applicable regulatory requirements. We also need to complete process validation on the finished product in the packaging we propose for commercial sales. This includes testing of stability, measurement of impurities and testing of other product specifications by validated test methods. If the FDA does not consider the result of the process validation or required testing to be satisfactory, we may not obtain approval to launch the product or approval, launch or commercial supply after launch may be delayed. The FDA and comparable foreign regulatory authorities may also implement new requirements, or change their interpretation and enforcement of existing requirements, for manufacture, packaging or testing of products at any time. If we are unable to comply, we may be subject to regulatory actions, civil actions or penalties which could harm our business. We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws health information privacy and security laws, and other healthcare laws and regulations. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties. Healthcare providers and third-party payors will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may affect the business or financial arrangements and relationships through which we would market, sell and distribute our products. Even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors, federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our business. The laws that may affect our ability to operate include, but are not limited to:  the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, receiving, offering, or paying remuneration, directly or 68  indirectly, in cash or in kind, in exchange for or to induce either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare programs such as Medicare and Medicaid. A person or entity does not need to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. On December 2, 2020, the OIG, published further modifications to the federal Anti-Kickback Statute. Under the final rules, OIG added safe harbor protections under the Anti-Kickback Statute for certain coordinated care and value-based arrangements among clinicians, providers, and others. This rule (with exceptions) became effective January 19, 2021;  the federal false claims and civil monetary penalties laws, including the False Claims Act, which can be enforced through civil whistleblower or qui tam actions, 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, fictitious, or fraudulent; knowingly making, using, or causing to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the government; or knowingly making, using, or causing to be made or used, a false record or statement to avoid, decrease or conceal an obligation to pay money to the federal government. In addition, the government may assert that a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false of fraudulent claim for purposes of the False Claims Act. Manufacturers can be held liable under the federal False Claims Act even when they do not submit claims directly to government payors if they are deemed to “cause” the submission of false or fraudulent claims;  HIPAA, which created new federal criminal statutes that prohibit a person or entity from, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false, fictitious, or fraudulent statements or representations in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters. Similar to the 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;  HIPAA, as amended by HITECH, and their implementing regulations, which also imposes obligations, including mandatory contractual terms, on “covered entities,” including certain healthcare providers, health plans, and healthcare clearinghouses, and their respective “business associates” that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity as well as their covered subcontractors with respect to safeguarding the privacy, security and transmission of individually identifiable health information. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions;  the federal civil monetary penalties statute, which prohibits, among other things, the offering or giving of remuneration to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular supplier of items or services reimbursable by a Federal or state governmental program;  the federal Physician Payment Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid  or the Children’s Health Insurance Program (with certain exceptions) to report annually to the government information related to certain payments and other “transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and requires applicable manufacturers to report annually to the government ownership and investment interests held by the physicians described above and their immediate family members and payments or other “transfers of value” to such physician owners. Beginning in 2022, applicable manufacturers also will be required to report such information regarding its payments and other transfers of value during the previous year to physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists and certified nurse midwives; and  analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical companies to comply with the 69 pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; and state laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state and foreign laws governing the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Further, in March 2010, the ACA, among other things, amended the intent requirements of the federal Anti-Kickback Statute and certain criminal statutes governing healthcare fraud. A person or entity can now be found guilty of violating the statute without actual knowledge of the statute or specific intent to violate it. In addition, the ACA provided that the government may 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 purposes of the False Claims Act. Moreover, while we do not submit claims and our customers make the ultimate decision on how to submit claims, from time to time, we may provide reimbursement guidance to our customers. If a government authority were to conclude that we provided improper advice to our customers or encouraged the submission of false claims for reimbursement, we could face action against us by government authorities. Any violations of these laws, or any action against us for violation of these laws, even if we successfully defend against it, could result in a material adverse effect on our reputation, business, results of operations and financial condition. The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform. Federal and state enforcement bodies have continued their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and significant settlements in the healthcare industry. Responding to investigations can be time-and resource-consuming and can divert management’s attention from the business. Additionally, as a result of these investigations, healthcare providers and entities may have to agree to additional onerous compliance and reporting requirements as part of a consent decree or corporate integrity agreement. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business. If our operations are found to be in violation of any of these laws or any other governmental laws and regulations that may apply to us, we, or our directors, officers, employees, independent contractors, and/or agents, may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, contractual damages, reputational harm, diminished profits and the curtailment or restructuring of our operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain. In the United States and some foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things, prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product candidates for which we obtain marketing approval. For example, in the United States in March 2010, the ACA was enacted to increase access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and the health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. The law has continued the downward pressure on pharmaceutical pricing, especially under the Medicare program, and increased the industry’s regulatory burdens and operating costs. Among the provisions of the ACA of importance to our potential product candidates are the following:  an annual, non-tax deductible fee payable by any entity that manufactures or imports specified branded prescription drugs and biologic agents payable to the federal government based on each company’s market share of prior year total sales of branded products to certain federal healthcare programs;  an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;  a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;  extension of manufacturers’ Medicaid rebate liability to individuals enrolled in Medicaid managed care organizations; 70  expansion of eligibility criteria for Medicaid programs in certain states;  a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 50% (increased to 70% pursuant to the Bipartisan Budget Act of 2018, effective as of January 1, 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries under their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;  expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;  a new requirement to annually report drug samples that manufacturers and distributors provide to physicians; and  a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research. There have been executive, judicial and Congressional challenges to certain aspects of the ACA. While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the ACA have been signed into law. For example, the Tax Cuts and Jobs Act of 2017 ("Tax Act"), included a provision that decreased the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year, commonly referred to as the “individual mandate,” to $0, effective January 1, 2019. On December 14, 2018, a federal district court in Texas ruled the individual mandate is a critical and inseverable feature of the ACA, and therefore, because it was repealed as part of the Tax Act, the remaining provisions of the ACA are invalid as well. On December 18, 2019, the Fifth Circuit U.S. Court of Appeals held that the individual mandate is unconstitutional, and remanded the case to the lower court to reconsider its earlier invalidation of the full ACA. On June 17, 2021, the United States Supreme Court dismissed such constitutional challenge to the ACA on grounds that the plaintiffs’ were not able to prove that they were harmed by the law. President Biden issued an executive order to initiate a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace, which began February 15, 2021 and will remain open through August 15, 2021. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. It is unclear how the Supreme Court ruling, other such litigation and the healthcare reform measures of the Biden administration will impact the ACA. In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. These changes included aggregate reductions to Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2030 unless additional action is taken by Congress. However, the Medicare sequester reductions under the Budget Control Act of 2011 have been suspended from May 1, 2020 through December 31, 2021 due to the COVID-19 pandemic. In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers and increased the statute of limitations period in which the government may recover overpayments to providers from three to five years. In addition, recently there has been heightened governmental scrutiny over the manner in which drug manufacturers set prices for their commercial products. At the federal level, the former Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives. It is unclear whether the Biden administration will work to reverse these measures or pursue similar policy initiatives. Individual states in the United States have also become increasingly aggressive in passing legislation and implementing regulations designed to control drug pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our product candidates, if approved. We expect that additional state and federal healthcare reform measures will be adopted in the future, particularly in light of the new presidential administration, any of which could limit the amounts that federal and state governments will pay for healthcare therapies, which could result in reduced demand for our product candidates or additional pricing pressures. Legislative and regulatory proposals have also been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements. Further, it is possible that additional governmental action is taken in response to the COVID-19 pandemic. 71 Governments outside the United States tend to impose strict price controls, which may adversely affect our revenues, if any. In some countries, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product candidate. In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after coverage and reimbursement have been obtained. Reference pricing used by various countries and parallel distribution or arbitrage between low-priced and high-priced countries, can further reduce prices. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies, which is time-consuming and costly. If coverage and reimbursement of our product candidates are unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed, possibly materially. Our future success depends on our ability to retain our executive officers and to attract, retain and motivate highly qualified personnel. If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy. Our industry has experienced a high rate of turnover of management personnel in recent years. Our ability to compete in the highly competitive biotherapeutics and pharmaceuticals industries depends upon our ability to attract and retain highly qualified managerial, scientific, medical, engineering and regulatory personnel. We are highly dependent on our founder and Executive Chairman, Mir Imran, and our existing senior management team. We are not aware of any present intention of any of these individuals to leave us. All of our employees may terminate their employment with us at any time, with or without notice. In addition, we manufacture the RaniPill capsule internally. As a result, we rely and will continue to rely on highly qualified manufacturing personnel to manufacture the RaniPill capsule. The loss of the services of any of our executive officers or other key employees and our inability to find suitable replacements would harm our manufacturing efforts as well as our business, financial condition and prospects. Our success depends on our ability to continue to attract, retain and motivate highly skilled and experienced personnel with scientific, medical, regulatory, manufacturing and management training and skills. We may not be able to attract or retain qualified personnel in the future due to the intense competition for a limited number of qualified personnel among biotherapeutics, biotechnology, pharmaceutical and other businesses. Many of the other biopharmaceutical companies that we compete against for qualified personnel have greater financial and other resources, different risk profiles and a longer history in the industry than we do. Our competitors may provide higher compensation or more diverse opportunities and better opportunities for career advancement. Any or all of these competing factors may limit our ability to continue to attract and retain high quality personnel, which could negatively affect our ability to successfully develop and commercialize product candidates and to grow our business and operations as currently contemplated. We will need to expand the size of our organization, and we may experience difficulties in managing this growth. As of September 30, 2021, we had 91 full-time employees. As our development and commercialization plans and strategies develop and we operate as a public company, we expect to need additional managerial, operational, scientific, sales, marketing, development, regulatory, manufacturing, financial and other resources. Future growth would impose significant added responsibilities on members of management, including:  designing and managing our clinical trials effectively;  identifying, recruiting, maintaining, motivating and integrating additional employees;  managing our manufacturing and development efforts effectively;  improving our managerial, development, operational and financial systems and controls; and  expanding our facilities. As our operations expand, we expect that we will need to manage relationships with our partners, suppliers, vendors and other third parties. Our future financial performance and our ability to develop and commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage any future growth effectively. We may not be successful in accomplishing these tasks in growing our company, and our failure to accomplish any of them could adversely affect our business and operations. 72 If we do not achieve our projected development and commercialization goals in the timeframes we announce and expect, the commercialization of our product candidates may be delayed, and our business will be harmed. We estimate for planning purposes the timing of the accomplishment of various scientific, clinical, regulatory and other product development objectives. These milestones may include our expectations regarding the commencement or completion of scientific studies, clinical trials, the submission of regulatory filings, or commercialization objectives. From time to time, we may publicly announce the expected timing of some of these milestones, such as the completion of an ongoing clinical trial, the initiation of other clinical programs, receipt of marketing approval, or a commercial launch of a product. The achievement of many of these milestones may be outside of our control. All of these milestones are based on a variety of assumptions which may cause the timing of achievement of the milestones to vary considerably from our estimates, including:  our available capital resources or capital constraints we experience;  the rate of progress, costs and results of our clinical trials and research and development activities, including the extent of scheduling conflicts with participating clinicians and collaborators, and our ability to identify and enroll patients who meet clinical trial eligibility criteria;  our receipt of approvals by the FDA and comparable foreign regulatory authorities and the timing thereof;  other actions, decisions or rules issued by regulators;  our ability to access sufficient, reliable and affordable supplies of compounds used in the manufacture of our product candidates;  the ability of our suppliers to reliably provide the quantity of materials needed to manufacture and commercialize our products;  the non-occurrence of adverse events or serious adverse events in preclinical studies or clinical trials of our product candidates;  the efforts of our collaborators and the success of our own efforts with respect to the commercialization of our products; and  the securing of, costs related to, and timing issues associated with, product manufacturing, including scale and automation processes, as well as sales and marketing activities. If we fail to achieve announced milestones in the timeframes we announce and expect, the commercialization of our product candidates may be delayed and our business and results of operations may be harmed. We may engage in strategic transactions that could impact our liquidity, increase our expenses and present significant distractions to our management. From time to time, we may consider strategic transactions, such as acquisitions of companies, asset purchases and out-licensing or in-licensing of intellectual property, products or technologies. Any future transactions could increase our near and long-term expenditures, result in potentially dilutive issuances of our equity securities, including our common stock, or the incurrence of debt, contingent liabilities, amortization expenses or acquired in-process research and development expenses, any of which could affect our financial condition, liquidity and results of operations. Additional potential transactions that we may consider in the future include a variety of business arrangements, including spin-offs, strategic partnerships, joint ventures, restructurings, divestitures, business combinations and investments. Future acquisitions may also require us to obtain additional financing, which may not be available on favorable terms or at all. These transactions may never be successful and may require significant time and attention of management. In addition, the integration of any business that we may acquire in the future may disrupt our existing business and may be a complex, risky and costly endeavor for which we may never realize the full benefits of the acquisition. Accordingly, although we may not undertake or successfully complete any additional transactions of the nature described above, any additional transactions that we do complete could have a material adverse effect on our business, results of operations, financial condition and prospects. 73 Our insurance policies are expensive and only protect us from some business risks, which will leave us exposed to significant uninsured liabilities. We do not carry insurance for all categories of risk that our business may encounter. Some of the policies we currently maintain include products and completed operations liability, business personal property and directors’ and officers’ insurance. We do not know, however, if we will be able to maintain insurance with adequate levels of coverage. Any significant uninsured liability may require us to pay substantial amounts, which would adversely affect our financial position and results of operations. If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business. We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties. Although we maintain workers’ compensation insurance to cover us for costs and expenses, we may incur due to injuries to our employees resulting from the use of hazardous materials or other work-related injuries, this insurance may not provide adequate coverage against potential liabilities. In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions. Our employees, independent contractors, principal investigators, consultants and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business. We are exposed to the risk that our employees, independent contractors, principal investigators, consultants and vendors may engage in fraudulent conduct or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violates: (i) FDA laws and regulations or those of comparable foreign regulatory authorities, including those laws that require the reporting of true, complete and accurate information to the FDA, (ii) manufacturing standards, (iii) federal and state data privacy, security, fraud and abuse and other healthcare laws and regulations established and enforced by comparable foreign regulatory authorities, or (iv) laws that require the true, complete and accurate reporting of financial information or data. Activities subject to these laws also involve the improper use or misrepresentation of information obtained in the course of clinical trials, creating fraudulent data in our preclinical studies or clinical trials or illegal misappropriation of drug product, which could result in regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and third-parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions. Our headquarters and certain of our data storage facilities are located near known earthquake fault zones. The occurrence of an earthquake, fire or any other catastrophic event could disrupt our operations or the operations of third parties who provide vital support functions to us, which could have a material adverse effect on our business and financial condition. We and some of the third-party service providers on which we depend for various support functions, such as data storage, are vulnerable to damage from catastrophic events, such as power loss, natural disasters, terrorism and similar unforeseen events beyond our control. Our corporate headquarters is located in San Jose, which in the past has experienced severe earthquakes and fires. We do not carry earthquake insurance. Earthquakes or other natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition and prospects. If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, damaged critical infrastructure, such as our data storage facilities or financial systems, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. We do 74 not have a disaster recovery and business continuity plan in place. We may incur substantial expenses as a result of the absence or limited nature of our internal or third-party service provider disaster recovery and business continuity plans, which, particularly when taken together with our lack of earthquake insurance, could have a material adverse effect on our business. Furthermore, integral parties in our supply chain are operating from single sites, increasing their vulnerability to natural disasters or other sudden, unforeseen and severe adverse events. If such an event were to affect our supply chain, it could have a material adverse effect on our development plans and business. Changes in funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new products and services from being developed or commercialized in a timely manner, 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. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory authorities, such as the FDA, have had to furlough critical FDA employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Since March 2020 when foreign and domestic inspections were largely placed on hold, the FDA has been working to resume routine surveillance, bioresearch monitoring and pre-approval inspections to prioritized basis and may experience delays in their regulatory activities. The FDA has developed a rating system to assist in determining when and where it is safest to conduct prioritized domestic inspections and resumed inspections in China and India in 2021. In April 2021, the FDA issued guidance for industry formally announcing plans to employ remote interactive evaluations, using risk management methods, to meet user fee commitments and goal dates. Should FDA determine that an inspection is necessary for approval and inspection cannot be completed during the review cycle due to restrictions on travel, and the FDA does not determine a remote interaction evaluation to be appropriate, the agency has stated that it generally intends to issue a complete response letter. Further, if there is an inadequate information to make a determination on the acceptability of a facility, FDA may defer action on the application until an inspection can be completed. In 2020, several companies announced receipt of complete response letters due to the FDA’s inability to complete required inspections for their applications. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or comparable foreign regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or comparable foreign regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business. The COVID-19 pandemic could adversely impact our business including our ongoing and planned preclinical studies and clinical trials. Since COVID-19 surfaced in Fall 2019, the virus has spread to numerous countries, including the United States, resulting in the World Health Organization characterizing COVID-19 as a pandemic. As a result of the COVID-19 pandemic, we have experienced and may continue to experience delays in our preclinical and planned clinical development activities. The COVID-19 pandemic has and may continue to impact the Company’s third-party manufacturers and suppliers, which could disrupt its supply chain or the availability or cost of materials. The effects of the public health directives and the Company’s work-from-home policies may negatively impact productivity, disrupt its business, and delay clinical programs and timelines and future clinical trials, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on the Company’s ability to conduct business in the ordinary course. These and similar, and perhaps more severe, disruptions in the Company’s operations could negatively impact business, results of operations and financial condition, including its ability to obtain financing. The extent to which the COVID-19 pandemic will impact our business will depend on future developments, which are highly uncertain and cannot be predicted, such as the continued geographic spread of the disease, the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease and to address its impact, including on financial markets or otherwise. As the COVID-19 pandemic continues, we could experience other disruptions that could severely impact our business, current and planned clinical trials and preclinical studies, including:  inability of our management to travel in connection with establishing partnerships and collaborations; 75  delays in receiving the supplies, materials and services needed to conduct preclinical studies and clinical trials;  disruption of our access to capital in the global financial markets;  delays or difficulties in enrolling patients in our planned Phase 1 clinical trials of RT-102, RT-109 (an o ral administration of human growth hormone ("hGH") for the treatment of growth hormone deficiency) and our other future clinical trials;  delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;  diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of clinical trials;  interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others or interruption of clinical trial subject visits and study procedures, which may impact the integrity of subject data and clinical study endpoints;  limitations in resources, including our employees, that would otherwise be focused on the conduct of our business or our current or planned preclinical studies or clinical trials, including because of sickness, the desire to avoid contact with large groups of people or restrictions on movement or access to our facility as a result of government-imposed “shelter in place” or similar working restrictions;  interruptions or delays in the operations of the FDA or comparable foreign regulatory authorities, which may impact review and approval timelines;  changes in regulations as part of a response to the COVID-19 pandemic which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs or require us to discontinue clinical trials altogether;  interruptions or delays to our pipeline and research programs; and  delays in necessary interactions with regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or furlough of government or contractor personnel. Further, as a result of the COVID-19 pandemic, the extent and length of which is uncertain, we may be required to develop and implement additional clinical trial policies and procedures designed to help protect trial participants from the COVID-19 virus, which may include using telemedicine visits, remote monitoring of patients and clinical sites, and measures to ensure that data from clinical trials that may be disrupted as a result of the pandemic are collected pursuant to the trial protocol and consistent with GCPs, with any material protocol deviation reviewed and approved by the site IRB. Patients who may miss scheduled appointments, any interruption in trial drug supply, or other consequence that may result in incomplete data being generated during a trial as a result of the pandemic must be adequately documented and justified. For example, on March 18, 2020, the FDA issued a guidance on conducting clinical trials during the pandemic, which describe a number of considerations for sponsors of clinical trials impacted by the pandemic, including the requirement to include in the clinical trial report (or as a separate document) contingency measures implemented to manage the trial, and any disruption of the trial as a result of the COVID-19 pandemic; a list of all trial participants affected by the COVID-19-pandemic related trial disruption by unique subject identifier and by investigational site, and a description of how the individual’s participation was altered; and analyses and corresponding discussions that address the impact of implemented contingency measures (e.g., participant discontinuation from investigational product and/or trial, alternative procedures used to collect critical safety and/or efficacy data) on the safety and efficacy results reported for the trial. Further, the COVID-19 pandemic may impact patient enrollment in our planned future Phase 1 clinical trials. In particular, some sites may delay enrollment to focus on, and direct resources to, COVID-19, while at other sites, patients may choose not to enroll or continue participating in the clinical trial as a result of the pandemic. Potential patients in our planned clinical trials may choose to not enroll, not participate in follow-up clinical visits, or drop out of the trial as a precaution against contracting COVID-19. Further, some patients may not be able or willing to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services. Additionally, three vaccines for COVID-19 were granted Emergency Use Authorization by the FDA in late 2020 and early 2021, and more may be authorized. The resultant demand for vaccines and potential for manufacturing facilities and materials to 76 be commandeered under the Defense Production Act of 1950, or equivalent foreign legislation, may make it more difficult to obtain materials or manufacturing slots for the products needed for our planned clinical trials, which could lead to delays in these trials. The spread of COVID-19 and actions taken to reduce its spread may also materially affect us economically. While the potential economic impact brought by, and the duration of, the COVID-19 pandemic may be difficult to assess or predict, there could be a significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity and financial position. In addition, the trading prices for other companies have been highly volatile as a result of the COVID-19 pandemic. As a result, we may face difficulties raising capital through sales of our Class A common stock or such sales may be on unfavorable terms. While the extent of the impact of the COVID-19 pandemic on our business and financial results is uncertain, a continued and prolonged public health crisis such as the COVID-19 pandemic could have a material negative impact on our business, financial condition, and operating results. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section. Our internal computer systems, or those used by our third-party collaborators or other contractors or consultants, may fail or suffer security breaches. Despite the implementation of security and back-up measures, our internal computer, server, and other information technology systems as well as those of our third-party collaborators, consultants, contractors, suppliers, and service providers, have and may continue to be vulnerable to damage from physical or electronic break-ins, computer viruses, malware, ransomware, natural disasters, terrorism, war, telecommunication and electrical failure, denial of service, and other cyberattacks or disruptive incidents that could result in unauthorized access to, use or disclosure of, corruption of, or loss of sensitive, and/ or proprietary data, including personal information, including health-related information, and could subject us to significant liabilities and regulatory and enforcement actions, and reputational damage. For example, the loss of clinical trial data from completed or ongoing clinical trials could result in delays in any regulatory approval or clearance efforts and significantly increase our costs to recover or reproduce the data, and subsequently commercialize the product. Additionally, theft of our intellectual property or proprietary business information could require substantial expenditures to remedy. If we or our third-party collaborators, consultants, contractors, suppliers, or service providers were to suffer an attack or breach, for example, that resulted in the unauthorized access to or use or disclosure of personal or health information, we may have to notify consumers, partners, collaborators, government authorities, and the media, and may be subject to investigations, civil penalties, administrative and enforcement actions, and litigation, any of which could harm our business and reputation. Likewise, we rely on our third-party research institution collaborators and other third parties to conduct clinical trials, and similar events relating to their computer systems could also have a material adverse effect on our business. The COVID-19 pandemic has generally increased the risk of cybersecurity intrusions. For example, there has been an increase in phishing and spam emails as well as social engineering attempts from “hackers” hoping to use the recent COVID-19 pandemic to their advantage. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or systems, or inappropriate or unauthorized access to or disclosure or use of confidential, proprietary, or other sensitive, personal, or health information, we could incur liability and suffer reputational harm, and the development and commercialization of the RaniPill capsule could be delayed. Risks Related to Our Intellectual Property Our commercial success may depend in part on our ability to build and maintain our intellectual property portfolio. Our commercial success may depend in part, and perhaps in large part, on having a strong portfolio of intellectual property rights globally to prevent others from copying our products. We rely on a combination of contractual provisions, patent rights, trademark rights, and trade secrets to protect our core technology and products. However, these legal measures may only afford limited protection. For example, we may not be able to obtain or maintain intellectual property rights that we believe are important to our business, or in a form that provides us with a competitive advantage. Moreover, obtaining and maintaining intellectual property protection is expensive, and reduces the budget available for research, development, and other expenditures. We must balance the need for intellectual property protection against the need for furthering our development and commercialization activities, which may mean that aspects of our technology and methodology may not be protected by our intellectual property portfolio. Where our intellectual property rights are insufficient to prevent or limit commercialization of competitive products in a jurisdiction, potential competitors might be able to enter or expand in a market more easily, which could have a material adverse effect on our business. The following ways in which our intellectual property portfolio may be limited represent risks to our capability to reduce competition and thus risks to our business. 77 We may not be able to obtain sufficient patent coverage. The process of applying for and obtaining a patent is considerably time consuming and expensive, and we may not have the resources to prepare, file, prosecute, or maintain all desirable patent applications and patents in all jurisdictions where protection may be commercially advantageous. It is also possible that we may fail to identify patentable aspects of inventions made in the course of development and commercialization activities before it is too late to obtain patent protection on them, or before others file patent applications covering our product candidates. Moreover, we might not have been the first to make the inventions for which we apply for patents and therefore not be entitled to a patent on such inventions. Additionally, the scope of our patent coverage may not provide desired coverage for all aspects of our product candidates in all jurisdictions, and scope may differ between jurisdictions. For example, examination of each national or regional patent application is an independent proceeding; as a result, patent applications in the same family may issue with claims of different scope in various jurisdictions, or may even be refused in some or all jurisdictions. If we fail to achieve the desired coverage for all aspects of our product candidates, competitors may be able to copy our technology or design around our patents, and our business may be harmed. Because the patent position of companies in our industry involves complex legal and factual questions, we cannot predict the validity and enforceability of our patents or provide any assurances that any of our patent applications will be found to be patentable, with certainty. Our issued patents may not provide us with any competitive advantages, may be held invalid or unenforceable as a result of legal challenges by third parties or could be circumvented. Our competitors may also independently develop processes, technologies or products similar to ours or design around or otherwise circumvent any patents issued to, or licensed by, us. Thus, any patents that we own or license from others may not provide adequate protection against competitors. Our pending patent applications, those we may file in the future or those we may license from third parties may not result in patents being issued. If these patents are issued, they may not provide us with proprietary protection or competitive advantages. After the completion of development and registration of our patents, third parties may still manufacture or market our products despite our patent protected rights. If the protection of our proprietary rights is inadequate to prevent use or appropriation by third parties, the value of our brand and other intangible assets may be diminished and competitors may be able to more effectively mimic our technology. If competitors were to mimic our technology, it may result in loss of sales and material litigation expenses. Such infringement of our patent protected rights is likely to cause us damage and lead to a reduction in the prices of our products, thereby reducing our anticipated profits. We may also inadvertently lose patent assets by failing to follow agency procedures. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process and after a patent issues. Non-compliance with provisions of the various patent agencies can result in the expiration or abandonment of a patent or patent application, resulting in partial or complete loss of associated patent rights in the relevant jurisdiction. For example, periodic maintenance fees, renewal fees, and annuity fees must often be paid to the USPTO and various foreign governmental patent agencies over the lifetime of a patent and/or patent application. These maintenance and annuity fees for our patents and patent applications are handled by a third-party annuity provider. Any errors by the annuity provider, including but not limited to, incomplete patent information, missed payment instructions, or errors in fund transfers may cause granted patents to expire and pending patent applications to be deemed abandoned. If we are unable to timely pay the annuity provider for their services, they may cease to pay the maintenance and annuity fees, and our patents and applications may lapse and no longer be in force. Additional non-compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits and failure to properly legalize and submit formal documents within prescribed time limits. While an unintentional lapse of a patent or patent application can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. This may create opportunities for competitors to enter the market, which could hurt our competitive position and could impair our ability to successfully commercialize our product candidates in any indication for which they are approved. For these and other reasons, we cannot guarantee that our patents will provide a basis for an exclusive market for our commercially viable products, or will even provide us with any competitive advantage. It is possible that defects of form in the preparation, filing or prosecution of our patents or patent applications may exist, or may arise in the future, for example with respect to proper priority claims, inventorship, claim scope or requests for patent term adjustments. If we fail to establish, maintain or protect such patent rights, they may be reduced or eliminated. If there are material defects in the form, preparation, prosecution or enforcement of our patents or patent applications, such patents may be invalid and/or unenforceable, and such applications may never result in valid, enforceable patents. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business. 78 We may not be able to obtain sufficient brand protection. We may rely on a combination of trademarks, service marks, brand names, trade names, and trade dress, and in some cases pending applications for the same, to protect our brands, in an effort to distinguish our products from the products of our competitors. Some of these mechanisms are protectable under state, federal, and foreign trademark laws and regulations. Although limited protection is available without registration, it is preferable to register trademarks in jurisdictions where we may commercialize. We have registered or applied to register several trademarks in the United States and many other jurisdictions globally. We cannot ensure that our pending trademark applications will be approved. During trademark registration proceedings, our applications may be rejected by the USPTO or foreign agencies, or may be opposed by third parties. Although we are given an opportunity to respond, we may be unable to overcome such rejections or oppositions. In addition, third parties may seek to cancel registered trademarks, and our trademarks may not survive such proceedings. In the event that our trademarks are finally rejected or successfully challenged, we could be forced to rebrand, which could result in loss of brand recognition and could require us to devote resources towards advertising and marketing with new branding. Our existing trademarks, whether registered or unregistered, face additional hurdles which may have a material adverse effect on our business. For example: one or more of our current or future trademarks may become used by the public in a manner that the use of the trademark becomes generic and loses its trademark protection in one or more jurisdictions; competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion; and, if we are unable to establish name recognition based on our branding, then we may not be able to compete effectively. Any of the foregoing could have a material adverse effect on our competitiveness. In addition, our competitors may infringe or otherwise violate our trademarks and we may not have adequate resources to enforce our trademarks. Domain names are also important to our brand identity and commercialization efforts and we have many registered domain names. However, there are several dozens of top-level domains and more coming, and there are several trademarks or other names that we may wish to incorporate into domain names. The combination of domains and names that may be of interest to our business could number in the hundreds or the thousands. Further, many domain names of interest are already registered by a third party. Therefore, we will not be able to obtain each and every domain name that may be of interest to our business. There is a risk that a competitor or other third party could register a domain name that inhibits our ability to advertise, confuses our customers, or redirects our potential business to other companies. Trademarks and domain names are intended, and in some cases required, to be used by their owners. In the absence of meaningful use, we may be forced to forfeit various ones of our trademarks and domain names. Intellectual property law and regulation could affect the value of our intellectual property portfolio. Interpretation of existing laws and regulations is uncertain and may depend on specific facts of a case. Therefore, we cannot be certain of the effectiveness of our intellectual property against third parties. Further, laws and regulations in general may not provide sufficient protection to prevent, or provide adequate remedy for, the infringement, use, violation or misappropriation of our patents, trademarks, data, technology and other intellectual property and services. Moreover, changes in laws, or changes in interpretations of laws, may unpredictably weaken our ability to obtain, defend, or enforce our intellectual property rights. A weakened ability to obtain, defend, or enforce rights covering our proprietary technologies could materially and adversely affect our business prospects and financial condition. For example, the United States Supreme Court and the United States Court of Appeals for the Federal Circuit have made, and will likely continue to make, changes in how the patent laws of the United States are interpreted. The United States Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations, and there are other open questions under patent law that courts have yet to decisivel