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Item 1A. Risk Factors

2021-02-12 compared with 2020-02-14 · 305 added, 293 removed, 683 unchanged (47% of the section changed)

Investing in our common stock involves a high degree of risk.

You should carefully consider the following risks, together with all the other information in this Annual Report, including our financial statements and notes thereto, before deciding to invest in our common stock.

You should carefully consider the following material risks, together with all the other information in this Annual Report, including our financial statements and notes thereto, before deciding to invest in our common stock.

The risks and uncertainties described below are not the only ones we face.

Additional risk and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations.

If any of the following risks actually materialize, our operating results, financial condition, and liquidity could be materially adversely affected.

As a result, the trading price of our common stock could decline and you could lose part or all of your investment.

Our company’s business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to those described below, any one or more of which could, directly or indirectly, cause our actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results.

Any of these factors, in whole or in part, could materially and adversely affect our business, prospects, financial condition, operating results and stock price.

Because of the following factors, as well as other factors affecting our financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.

Risk Factor Summary

We have a history of operating losses and anticipate that we will continue to incur losses for the foreseeable future.

We have limited experience in generating revenue from product sales.

We expect we will likely need to raise additional capital to fund our activities.

Clinical drug development is a lengthy and expensive process with uncertain outcomes.

If we do not achieve our projected development goals in the time frames we announce and expect, we may experience delays in commercialization of our products and the reputation of our management may be adversely affected.

We may experience difficulty in enrolling patients, which could delay or prevent clinical studies of our product candidates.

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy and inherently unpredictable.

Our product candidates, including our gene therapy product candidates, may cause undesirable or serious side effects that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in other negative consequences following marketing approval, if any.

Our products will remain subject to regulatory scrutiny even if we obtain regulatory approval.

We may not realize the full commercial potential of our product candidates if we are unable to source and develop effective biomarkers.

We rely on third parties to conduct our nonclinical and clinical studies and perform other tasks for us.

We are dependent on KKC for the clinical and commercial supply of Crysvita for all major markets and for the development and commercialization of Crysvita in certain major markets.

We have no experience as a company developing a manufacturing facility.

We rely on third parties to manufacture our products and product candidates and face a multitude of manufacturing risks.

The loss of, or failure to supply by, any of any of our single-source suppliers for our drug substance and drug product could adversely affect our business.

The actions of distributors and specialty pharmacies could affect our ability to sell or market products profitably.

A competitor could misappropriate or disclose our trade secrets.

Our revenue may be adversely affected if the market opportunities for our products and product candidates are smaller than expected.

Our competitors may develop therapies that are similar, more advanced, or more effective than ours.

We may not successfully manage expansion of our company, including building an integrated commercial organization.

Our exclusive right to promote Crysvita in the United States and Canada expires in 2023.

Commercial success of our products depends on the degree of market acceptance by physicians, patients, third-party payors, and others in the medical community

We face uncertainty related to insurance coverage and reimbursement status of our newly approved products.

We may be adversely affected by the United Kingdom’s withdrawal from the EU.

If we, or our third party partners, are unable to maintain effective proprietary rights for our products, product candidates, or any future product candidates, we may not be able to compete effectively in our markets.

Claims of intellectual property infringement may prevent or delay our development and commercialization efforts.

We may not be successful in obtaining or maintaining necessary rights to our product candidates through acquisitions and in-licenses.

We may face competition from biosimilars or from generic versions of Dojolvi or our small-molecule product candidates, which may result in a material decline in sales of affected products.

We could lose license rights that are important to our business if we fail to comply with our obligations in the agreements under which we license intellectual property and other rights from third parties.

We may become involved in lawsuits to protect or enforce our patents or the patents of our licensors, or be subject to claims that challenge the inventorship or ownership of our patents.

Changes in U.S.

patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

We may not be able to protect our intellectual property rights throughout the world.

The ongoing COVID-19 pandemic has impacted our operations and could materially and adversely affect our business and operating results.

Our success depends in part on our ability to retain our President and Chief Executive Officer and other qualified personnel.

Our revenue may be impacted if we fail to obtain or maintain orphan drug exclusivity for our products.

Our operating results may be adversely impacted if our intangible assets become impaired.

We may not be successful in identifying, licensing, discovering, developing, or commercializing additional product candidates or we may fail to capitalize on opportunities that may be more profitable or for which there is a greater likelihood of success.

We may fail to comply with laws and regulations or changes in laws and regulations could adversely affect our business.

We are exposed to risks related to international expansion of our business outside of the United States.

Our business may be adversely affected in the event of computer system failures or security breaches.

We or our third party partners may be adversely affected by earthquakes or other serious natural disasters that are not adequately protected by business continuity and disaster recovery plans.

We may incur various costs and expenses and risks related to acquisition of companies or products or strategic transactions.

The market price of our common stock is highly volatile.

Future sales and issuances of our common stock could dilute the percentage ownership of our current stockholders and result in a decline in stock price.

We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.

Provisions in our amended and restated certificate of incorporation and by-laws, as well as provisions of Delaware law, could make it more difficult for a third-party to acquire us or increase the cost of acquiring us or could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

We face general risks related to our ability to maintain effective internal controls over financial reporting, additional tax liabilities related to our operations, our ability to use our net operating loss carryforwards and costs of litigation

Risks Related to Our Financial Condition and Capital Requirements

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change or add additional manufacturers or suppliers;

seek to expand upon or build our own manufacturing-related facilities and capabilities, including our plan to build our own GMP gene therapy manufacturing plant;

expand upon or build our own manufacturing-related facilities and capabilities, including construction of our own GMP gene therapy manufacturing plant;

seek regulatory and marketing approvals for our product candidates that successfully complete clinical studies;

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The net losses we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance.

We are just starting to generate revenue from product sales.

Our ability to generate significant revenue from product sales depends on our ability, alone or with strategic collaboration partners, to successfully commercialize our products and to complete the development of, and obtain the regulatory and marketing approvals necessary to commercialize, one or more of our product candidates.

We have limited experience in generating revenue from product sales.

Our ability to generate substantial future revenue from product sales, including named patient sales, depends heavily on our success in many areas, including, but not limited to:

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If the number of our addressable rare disease patients is not as significant as we estimate, the indication approved by regulatory authorities is narrower than we expect, or the reasonably accepted population for treatment is narrowed by competition, physician choice, or treatment guidelines, we may not generate significant revenue from sales of our products, even if they receive regulatory approval.

We expect we may need to raise additional capital to fund our activities.

We expect we will likely need to raise additional capital to fund our activities.

This additional financing may not be available on acceptable terms, if at all.

Failure to obtain this necessary capital when needed may force us to delay, limit, or terminate our product development efforts or other activities.

As of December 31, 2019, our available cash, cash equivalents, and investments were $760.4 million.

We expect we may need additional capital to continue to commercialize our products, and to develop and obtain regulatory approval for, and to commercialize, all of our product candidates.

As of December 31, 2020, our available cash, cash equivalents, and marketable debt securities were $1,212.0 million.

We expect we will likely need additional capital to continue to commercialize our products, and to develop and obtain regulatory approval for, and to commercialize, all of our product candidates.

In addition, our operating plans may change as a result of many factors that may currently be unknown to us, and we may need to seek additional funds sooner than planned.

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If we incur debt, it could result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell, or license intellectual property rights, and other operating restrictions that could adversely impact our ability to conduct our business.

We have in the past sought and may in the future seek funds through a sale of future royalty payments similar to our transaction with Royalty Pharma or through collaborative partnerships, strategic alliances, and licensing or other arrangements and we may be required to relinquish rights to some of our technologies or product candidates, future revenue streams, research programs, and other product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results, and prospects.

We have in the past sought and may in the future seek funds through a sale of future royalty payments similar to our transaction with Royalty Pharma or through collaborative partnerships, strategic alliances, and licensing or other arrangements, such as our transaction with Daiichi Sankyo, and we may be required to relinquish rights to some of our technologies or product candidates, future revenue streams, research programs, and other product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results, and prospects.

Even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations.

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A failure of one or more clinical studies can occur at any stage of testing, and our future clinical studies may not be successful.

Product candidates that have shown promising results in early-stage clinical studies may still suffer significant setbacks in subsequent clinical studies.

Product candidates that have shown promising results in early-stage clinical studies may still suffer significant setbacks or fail in subsequent clinical studies.

The safety or efficacy results generated to date in clinical studies do not ensure that later clinical studies will demonstrate similar results.

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Results from investigator-sponsored studies or compassionate-use studies may not be confirmed in company-sponsored studies or may negatively impact the prospects for our programs.

Additionally, given the nature of the rare diseases we are seeking to treat, we often have to devise newly-defined endpoints to be tested in our studies, which can lead to some subjectivity in interpreting study results and could result in regulatory agencies not agreeing with the validity of our endpoints, or our interpretation of the clinical data, and therefore denying approval.

Given the illness of the patients in our studies and the nature of their rare diseases, we may also be required or choose to conduct certain studies on an open-label basis.

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Clinical study delays could also shorten any periods during which our products have commercial exclusivity and may allow our competitors to bring products to market before we do, which could negatively impact our ability to obtain orphan exclusivity and to successfully commercialize our product candidates and may harm our business and results of operations.

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

If we do not achieve our projected development goals in the time frames we announce and expect, the commercialization of our products may be delayed and the credibility of our management may be adversely affected and, as a result, our stock price may decline.

For planning purposes, we estimate the timing of the accomplishment of various scientific, clinical, regulatory, and other product development goals, which we sometimes refer to as milestones.

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Accordingly, there are limited patient pools from which to draw for clinical studies.

we estimate that approximately 8,000 patients in the developed world suffer from late-onset OTC deficiency, for which DTX301 is being studied, and these all may not be treatable if they are immune to the virus;

we estimate that approximately 6,000 patients worldwide suffer from GSDIa, for which DTX401 is being studied, and these all may not be treatable if they are immune to the virus.

we estimate that approximately 10,000 patients in the developed world suffer from OTC deficiency, of which 80% are classified as late-onset for which DTX301 is being studied, and these all may not be treatable if they are immune to the AAV viral vector;

we estimate that approximately 6,000 patients worldwide suffer from GSDIa, for which DTX401 is being studied, and these all may not be treatable if they are immune to the AAV viral vector;

we estimate that approximately 10,000 patients worldwide suffer from GSDIII, for which UX053 is being studied.

In addition to the rarity of these diseases, the eligibility criteria of our clinical studies will further limit the pool of available study participants as we will require patients to have specific characteristics that we can measure or to assure their disease is either severe enough or not too advanced to include them in a study.

The process of finding and diagnosing patients may prove costly, especially since the rare diseases we are studying are commonly under diagnosed.

The process of finding and diagnosing patients is costly, especially since the rare diseases we are studying are commonly under diagnosed.

We also may not be able to identify, recruit, and enroll a sufficient number of appropriate patients to complete our clinical studies because of demographic criteria for prospective patients, the perceived risks and benefits of the product candidate under study, the proximity and availability of clinical study sites for prospective patients, and the patient referral practices of physicians.

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Delays in completing our clinical studies 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.

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time consuming, and inherently unpredictable.

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We are not permitted to market or promote any of our product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities.

We have only obtained regulatory approval for two products, and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval.

To obtain regulatory approval in the United States and other jurisdictions, we must comply with numerous and varying requirements regarding safety, efficacy, chemistry, manufacturing and controls, clinical studies (including good clinical practices), commercial sales, pricing, and distribution of our product candidates.

We have only obtained regulatory approval for three products, and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval.

Further, as the clinical trial requirements of regulatory authorities and the criteria these regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of the product candidates, the regulatory approval process for novel product candidates, such as our gene therapy product candidates, can be more expensive and take longer than for other product candidates, leading to fewer product approvals.

To date, very few gene therapy products have received regulatory approval in the United States or Europe.

Business – Government Regulation”.

Even if we are successful in obtaining approval in one jurisdiction, we cannot ensure that we will obtain approval in any other jurisdictions.

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favorable communications early in the process do not ensure that approval will be obtained and unfavorable communications early on do not guarantee that approval will be denied.

If we are unable to obtain approval for our product candidates in multiple jurisdictions, our revenue and results of operations could be negatively affected.

Applications for our product candidates could fail to receive regulatory approval, or could be delayed in receiving regulatory approval, for many reasons, including but not limited to the following:

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In these circumstances, we work closely with the regulatory authorities to define the approval path and may have to qualify outcome measures as part of our development programs.

Additionally, many of the disease states we are targeting, such as LC-FAOD, are highly heterogeneous in nature, which may impact our ability to determine the treatment benefit of our potential therapies.

Additionally, many of the disease states we are targeting are highly heterogeneous in nature, which may impact our ability to determine the treatment benefit of our potential therapies.

This lengthy and uncertain approval process, as well as the unpredictability of the clinical and nonclinical studies, may result in our failure to obtain regulatory approval to market any of our product candidates, or delayed regulatory approval, which would significantly harm our business, results of operations, and prospects.

The regulatory approval process for novel product candidates, such as our gene therapy product candidates, can be more expensive and take longer than for other product candidates, and may change in the future.

The clinical trial requirements of regulatory authorities and the criteria these regulators use to determine the safety and efficacy of a product candidate vary substantially according to the type, complexity, novelty and intended use and market of the product candidate.

As a result, the regulatory approval process for novel product candidates such as our gene therapy product candidates can be more expensive and take longer than for other, better known or more extensively studied product candidates, which can lead to fewer product approvals.

To date, very few gene therapy products have received regulatory approval in the United States or Europe.

Additionally, the FDA, Health Canada, and the EMA have each expressed interest in further regulating biotechnology, including gene therapy and genetic testing.

For example, the EMA, which governs the development of gene therapies in the EU and may issue new guidelines concerning the development and marketing authorization for gene therapy products, advocates a risk-based approach to the development of a gene therapy product.

Agencies at both the federal and state level in the United States, as well as U.S.

congressional committees and foreign governments, have also expressed interest in further regulating the biotechnology industry.

Different regulatory approaches by jurisdiction can result in different or additional preclinical studies or clinical trials being required to support regulatory approval in each jurisdiction.

Regulatory requirements such as review committees and advisory groups, the new guidelines they promulgate, and new guidance issued by regulatory authorities may lengthen the regulatory review process, require us to perform additional studies or trials, increase our development costs, lead to changes in regulatory positions and interpretations, delay or prevent approval and commercialization of our product candidates or lead to significant post- approval limitations or restrictions.

As we advance our product candidates, we will be required to consult with these regulatory and advisory groups and comply with applicable guidelines.

If we fail to do so, we may be required to delay or discontinue development of such product candidates.

These additional processes may result in a review and approval process that is longer than we otherwise would have expected.

Delays as a result of an increased or lengthier regulatory approval process or further restrictions on the development of our product candidates can be costly and could negatively impact our or our collaborators’ ability to complete clinical trials and commercialize our current and future product candidates in a timely manner, if at all.

Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

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Our product candidates are in development and the safety profile has not been established.

For example, in a completed Phase 2 study, LC-FAOD patients treated with UX007 experienced treatment-related adverse events, the most common of which were diarrhea, abdominal/gastrointestinal pain, nausea, and vomiting.

There was one treatment-related serious adverse event of moderate gastroenteritis with vomiting.

There were two deaths during the LC-FAOD extension study, both deemed to be related to disease progression and not due to treatment with UX007.

Further, as one of the goals of Phase 1 and/or 2 clinical trials is to identify the highest dose of treatment that can be safely provided to study participants, adverse side effects, including serious adverse effects, have occurred in certain studies as a result of changes to the dosing regimen during such studies.

For instance, patients in our Phase 1/2 study of GTX-102 experienced a serious adverse event of lower extremity weakness believed to be related to local inflammation due to GTX-102 at the highest doses of the product.

Gene therapy product candidates using AAV vectors, like DTX301, have been associated with immunologic reaction to the capsid protein or gene at early time points after administration.

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Such side effects could also result in potential product liability claims.

We currently carry product liability insurance in the amount of $10.0 million per incident and $10.0 million in the aggregate, and we are required to maintain product liability insurance pursuant to certain of our agreements.

We believe our product liability insurance coverage is sufficient in light of our current clinical programs;

however, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability, or losses may exceed the amount of insurance that we carry.

There can be no assurance that our product liability insurance, which provides coverage in the amount of $10.0 million per incident and $10.0 million in the aggregate, will be sufficient in light of our current or planned clinical programs.

We may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability, or losses may exceed the amount of insurance that we carry.

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

In addition, regardless of merit or eventual outcome, product liability claims may result in impairment of our business reputation, withdrawal of clinical study participants, costs due to related litigation, distraction of management’s attention from our primary business, initiation of investigations by regulators, substantial monetary awards to patients or other claimants, the inability to commercialize our product candidates, and decreased demand for our product candidates, if approved for commercial sale.

Additionally, even though we received regulatory approval for Crysvita and Mepsevii and even if our product candidates receive marketing approval in the future, if we or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including but not limited to:

Additionally, even though we received regulatory approval for Crysvita, Mepsevii, and Dojolvi and even if our product candidates receive marketing approval in the future, if we or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including but not limited to:

regulatory authorities may withdraw approvals of such product;

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Public perception may be influenced by claims that gene therapy is unsafe, and gene therapy may not gain the acceptance of the public or the medical community.

For example, earlier gene therapy trials using other vectors led to several well- publicized adverse events, including cases of leukemia and death.

The risk of cancer remains a concern for gene therapy and we cannot assure you that it will not occur in any of our planned or future clinical studies.

In addition, there is the

potential risk of delayed adverse events following exposure to gene therapy products due to persistent biological activity of the genetic material or other components of products used to carry the genetic material.

For example, certain gene therapy trials using AAV8 vectors (although at significantly higher doses than those used in our gene therapy product candidates) and other vectors led to several well-publicized adverse events, including cases of leukemia and death.

The risk of cancer or death remains a concern for gene therapy and we cannot assure you that it will not occur in any of our planned or future clinical studies.

In addition, there is the potential risk of delayed adverse events following exposure to gene therapy products due to persistent biological activity of the genetic material or other components of products used to carry the genetic material.

Serious adverse events in our clinical trials, or other clinical trials involving gene therapy products, particularly AAV gene therapy products such as candidates based on the same capsid serotypes as our product candidates, or occurring during use of our competitors’ products, even if not ultimately attributable to the relevant product candidates, and the resulting publicity, could result in increased government regulation, unfavorable public perception, potential regulatory delays in the testing or approval of our gene therapy product candidates, stricter labeling requirements for those gene therapy product candidates that are approved and a decrease in demand for any such gene therapy product candidates, all of which would have an adverse effect on our business, financial condition, results of operations and prospects.

Even if we obtain regulatory approval for our product candidates, our products will remain subject to regulatory scrutiny.

Our products and any product candidates that are approved are subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, distribution, 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.

Business – Government Regulation”.

Manufacturers and manufacturers’ facilities are required to comply with extensive FDA, and comparable foreign regulatory authority, requirements, including ensuring that quality control and manufacturing procedures conform to Good Manufacturing Practices (GMP) regulations.

As such, we and our contract manufacturers will be subject to continual review and inspection to assess compliance with GMP and adherence to commitments made in any NDA, BLA, MAA, or other comparable application for approval in another jurisdiction.

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.

As such, we and our contract manufacturers are subject to continual review and inspection to assess compliance with GMP and adherence to commitments made in any NDA, BLA, MAA, or other comparable application for approval in another jurisdiction.

Regulatory authorities may, at any time, audit or inspect a manufacturing facility involved with the preparation of our products, product candidates or the associated quality systems for compliance with the regulations applicable to the activities being conducted.

If we, our collaborators, such as KKC, or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA or other applicable regulatory authority can impose regulatory sanctions including, among other things, the temporary or permanent suspension of a clinical study or commercial sales, recalls or seizures of product or the temporary or permanent closure of a facility or withdrawal of product approval.

If supply from one approved manufacturer is interrupted due to failure to maintain regulatory compliance, an alternative manufacturer would need to be qualified through an NDA or BLA supplement or MAA variation, or equivalent foreign regulatory filing, which could result in delays in product supply.

The regulatory agencies may also require additional studies if a new manufacturer is relied upon for commercial production.

Switching manufacturers may involve substantial costs and is likely to result in a delay in our desired clinical and commercial timelines.

Accordingly, we and others with whom we work are required 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 may be subject to limitations on the approved indicated uses for which the product may be marketed or other conditions of approval, or contain requirements for potentially costly post-marketing testing, including Phase 4 clinical studies, and surveillance to monitor the safety and efficacy of the product candidate.

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We will be required to report certain adverse events and manufacturing problems, if any, to the FDA and comparable foreign regulatory authorities.

Any new legislation addressing drug safety issues could result in delays in product development or commercialization, or increased costs to assure compliance.

We will have to comply with requirements concerning advertising and promotion for our products.

Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved label.

As such, we may promote our products only for indications or uses for which they have approval.

The holder of an approved NDA, BLA, MAA, or other comparable application must submit new or supplemental applications and obtain approval for certain changes to the approved product, product labeling, or manufacturing process.

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Development and manufacturing of companion diagnostics is complex and there are limited manufacturers with the necessary expertise and capability.

Even if we are able to find a qualified collaborator, it may not be able to manufacture the companion diagnostics at a cost or in quantities or on timelines necessary for use with our product candidates.

Even if we are able to successfully develop companion diagnostics, we may not be able to manufacture the companion diagnostics at a cost or in quantities or on timelines necessary for use with our product candidates.

To be successful, we need to address a number of scientific, technical and logistical challenges.

We have not yet initiated development and commercialization of companion diagnostics.

We have little experience in the development and commercialization of diagnostics and may not be successful in developing and commercializing appropriate diagnostics to pair with any of our product candidates that receive marketing approval.

We are currently working with a third party to develop companion diagnostics, however, we have little experience in the development and commercialization of diagnostics and may not ultimately be successful in developing and commercializing appropriate diagnostics to pair with any of our product candidates that receive marketing approval.

University of Pennsylvania School of Medicine currently conducts some of our clinical assays pursuant to a sponsored research agreement, one of which is required for our ongoing Phase 1/2 clinical trial.

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If the regulatory authorities determine that we have failed to comply with GLP, GMP, or GCP regulations, they may deny approval of our product candidates and/or we may be required to repeat clinical or nonclinical studies, which would delay the regulatory approval process.

Our CROs and other vendors and partners are not our employees, and except for remedies available to us under our agreements with such third parties, we cannot control whether or not they devote sufficient time and resources to our on-going nonclinical and clinical programs.

Our CROs and other vendors and partners are not our employees and we cannot control whether or not they devote sufficient time and resources to our on-going nonclinical and clinical programs, except for the limited remedies available to us under our agreements with such third parties.

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

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

Though we carefully manage our relationships with our vendors and partners, there can be no assurance that we will not encounter similar 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 business prospects.

Our efforts to manage our relationships with our vendors and partners can provide no assurance that we will not encounter similar 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 business prospects.

We also rely on third parties in other ways, including efforts to support patient diagnosis and identify patients, to assist our finance and legal departments, and to provide other resources for our business.

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KKC may make decisions regarding market access and pricing in countries where it has the sole right to commercialize our product candidates which can negatively impact our commercialization efforts in countries where we have the right to commercialize our product candidates;

KKC may fail to manufacture or supply sufficient drug product of Crysvita in compliance with applicable laws and regulations or otherwise for our development and clinical use, which could result in program delays;

KKC may fail to manufacture or supply sufficient drug product of Crysvita in compliance with applicable laws and regulations or otherwise for our commercial use, which could result in lost revenue;

KKC may fail to manufacture or supply sufficient drug product of Crysvita in compliance with applicable laws and regulations or otherwise for our development and clinical use or commercial use (including as a result of the COVID-19 pandemic), which could result in program delays or lost revenue;

KKC may elect to develop and commercialize Crysvita indications with a larger market than XLH and at a lower price, thereby reducing the profit margin on sales of Crysvita for any orphan indications, including XLH;

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the timing and amounts of expense reimbursement that we may receive are uncertain, and the total expenses for which we are obligated to reimburse KKC may be greater than anticipated.

We rely on third parties to manufacture our products and most of our product candidates and to acquire the raw material components to manufacture such products and product candidates.

Our business could be harmed if those third parties fail to provide us with sufficient quantities of drug product, or fail to do so at acceptable quality levels or cost.

We have limited infrastructure or capability internally to manufacture our products and product candidates, and we currently lack the resources and the capability to manufacture our products and most of our product candidates on a clinical or commercial scale.

We rely on our manufacturers to purchase from third-party suppliers the materials necessary to produce our products and product candidates for our clinical studies.

There are a limited number of suppliers for raw materials that we use to manufacture our drugs, placebos, or active controls, and there may be a need to identify alternate suppliers to prevent a possible disruption of the manufacture of the materials necessary to produce our products and our product candidates for our clinical studies, and, if approved, ultimately for commercial sale.

We also do not have any control over the process or timing of the acquisition of these raw materials by our manufacturers.

We may also experience interruptions in supply of product if the product or raw material components fail to meet our quality control standards or the quality control standards of our suppliers.

Any significant interruption in the supply of products due to delays in obtaining the raw material components or for other reasons could hinder our ability to distribute products to meet commercial demand and negatively impact our business.

Any significant delay or discontinuity in the supply of a product candidate, or the raw material components thereof, for an ongoing clinical study due to, among other things, the failure of a manufacturer to provide a drug substance or drug product of sufficient quantity or quality, or the need to replace a third-party manufacturer could considerably delay completion of our clinical studies, product testing, and potential regulatory approval of our product candidates, and could also impair named patient sale supply of our product candidates, which could harm our business and results of operations.

We have no experience as a company developing a manufacturing facility and may not be able to do so successfully if we determine to expand or develop our manufacturing capability and infrastructure.

We expect our future manufacturing strategy to involve the use of one or more CMOs as well as our own capabilities and infrastructure, including at our Woburn, MA facility or new facilities we may develop.

We expect that development of our own process development facility will provide us with enhanced control of material supply for both clinical trials and the commercial market, enable the more rapid implementation of process changes, and allow for better long-term margins.

However, we have no experience as a company in developing a manufacturing facility and may never be successful in developing our own manufacturing facility or capability.

Additionally, given that cGMP gene therapy manufacturing is a nascent industry, there are a small number of CMOs with the experience necessary to manufacture our gene therapy product candidates and we may have difficulty finding or maintaining relationships with such CMOs or hiring experts for internal manufacturing and accordingly, our production capacity may be limited.

We may establish multiple manufacturing facilities as we expand our commercial footprint to multiple geographies, which may lead to regulatory delays or prove costly.

We have no experience as a company developing a manufacturing facility and may experience unexpected costs or delays or ultimately be unsuccessful in developing a facility.

During the fourth quarter 2020, we completed our purchase of land located in the Town of Bedford, Massachusetts for construction of our gene therapy manufacturing facility and began construction of the base building for the facility.

We expect that the new facility will provide us with enhanced control of material supply for both clinical trials and the commercial market, enable the more rapid implementation of process changes, and allow for better long-term margins for our gene therapy products.

We currently anticipate construction of the facility to be completed in 2023.

We do not have experience as a company, however, in developing a manufacturing facility and we may experience unexpected costs or delays or ultimately be unsuccessful in developing the facility or capability.

As we expand our commercial footprint to multiple geographies, we may establish multiple manufacturing facilities, which may lead to regulatory delays or prove costly.

Even if we are successful, our manufacturing capabilities could be affected by cost-overruns, unexpected delays, equipment failures, lack of capacity, labor shortages, natural disasters, power failures, program failures, and numerous other factors that could prevent us from realizing the intended benefits of our manufacturing strategy and have a material adverse effect on our business.

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Several factors could cause production interruptions, including equipment malfunctions, regulatory inspections, facility contamination, raw material shortages or contamination, natural disasters, disruption in utility services, human error or disruptions in the operations of our suppliers.

Further, given that cGMP gene therapy, mRNA, DNA and siRNA manufacturing is a nascent industry, there are a small number of CMOs with the experience necessary to manufacture our gene therapy product candidates and we may have difficulty finding or maintaining relationships with such CMOs or hiring experts for internal manufacturing and accordingly, our production capacity may be limited.

Our gene therapy, mRNA, DNA and siRNA product candidates require processing steps that are more complex than those required for most small molecule drugs.

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Lot failures or product recalls could cause us to delay product launches or clinical trials, which could be costly to us and otherwise harm our business, financial condition, results of operations and prospects.

We also may encounter problems hiring and retaining the experienced scientific, quality-control and manufacturing personnel needed to operate the manufacturing processes for our gene therapy, mRNA, DNA and siRNA product candidates, which could result in delays in production or difficulties in maintaining compliance with applicable regulatory requirements.

We may be unable to scale up existing or new facilities, including our facility in Woburn, MA, and such facilities may not enable the expansion of our internal manufacturing process discovery and development to the extent we anticipate, or at all.

We are subject to a multitude of manufacturing risks, any of which could substantially increase our costs and limit the supply of our product candidates.

We rely on third parties to manufacture our products and our product candidates and we are subject to a multitude of manufacturing risks, any of which could substantially increase our costs and limit the supply of our product and product candidates.

As we currently lack the resources and the capability to manufacture our products and most of our product candidates on a clinical or commercial scale, we rely on third parties to manufacture our products and product candidates.

Although we oversee the contract manufacturers, we cannot control the manufacturing process of, and are substantially dependent on, our contract manufacturing partners for compliance with the regulatory requirements.

See “- Even if we obtain regulatory approval for our product candidates, our products will remain subject to regulatory scrutiny” risk factor above.

Further, we depend on our manufacturers to purchase from third-party suppliers the materials necessary to produce our products and product candidates.

We also do not have any control over the process or timing of the acquisition of these raw materials by our manufacturers.

We may also experience interruptions in supply of product if the product or raw material components fail to meet our quality control standards or the quality control standards of our suppliers.

Further, manufacturers that produce our products and product candidates may not have experience producing our products and product candidates at commercial levels and may not produce our products and product candidates at the cost, quality, quantities, locations, and timing needed to support profitable commercialization.

We have not yet secured manufacturing capabilities for commercial quantities of all of our product candidates and may be unable to negotiate binding agreements with manufacturers to support our commercialization activities on commercially reasonable terms.

Even if our third-party product manufacturers develop acceptable manufacturing processes that provide the necessary quantities of our products and product candidates in a compliant and timely manner, the cost to us for the supply of our products and product candidates manufactured by such third parties may be high and could limit our profitability.

For instance, KKC is our sole supplier of commercial quantities of Crysvita.

The supply price to us for commercial sales of Crysvita in Latin America and the transfer price for commercial sales of the product in the United States and Canada is 35% of net sales through December 31, 2022 and 30% thereafter, which is higher than the typical cost of goods sold by companies focused on rare diseases.

The process of manufacturing our products and product candidates is complex, highly regulated, and subject to several risks, including but not limited to those listed below.

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The drug substance and drug product for Crysvita are made by KKC pursuant to our license and collaboration agreement with KKC.

The drug substance and drug product for Mepsevii are manufactured by Rentschler under a commercial supply and services agreement and accompanying purchase orders.

The pharmaceutical-grade drug substance for UX007 is manufactured by IOI Oleo pursuant to our supply agreement with IOI Oleo, and the drug product for UX007 is prepared by Haupt Pharma AG and CPM pursuant to purchase orders.

The drug substance and drug product for Mepsevii are manufactured by Rentschler under a commercial supply and services agreement, accompanying purchase orders, and other agreements.

The pharmaceutical-grade drug substance for Dojolvi is manufactured by IOI Oleo pursuant to our supply agreement with IOI Oleo, and the drug product for Dojolvi is prepared by Haupt Pharma AG and CPM ContractPharma GmbH & Co.

pursuant to a services agreement and accompanying purchase orders.

Single source suppliers are also used for our gene therapy programs.

We have not currently secured any other suppliers for the drug substance or drug product of our products and product candidates and, although we believe that there are alternate sources of supply that could satisfy our clinical and commercial requirements, we cannot provide assurance that identifying alternate sources and establishing relationships with such sources would not result in significant expense or delay in the commercialization of our products or the development of our product candidates.

For instance, we have recently experienced disruptions from our third-party supplier related to the fill and finish activities for the manufacture of Mepsevii and as a result, we are in the process of identifying an alternative supplier to conduct such activities.

It may take a significant amount of time and expense to qualify an alternative supplier, once identified, and to transfer activities to such supplier.

If we fail to identify and qualify an alternative supplier in a timely manner, we could experience delays or disruptions in the supply of Mepsevii, which would negatively impact sales of the product.

Additionally, we may not be able to enter into supply arrangements with alternative suppliers on commercially reasonable terms or at all.

For instance, we experienced disruptions from our third-party supplier related to the fill and finish activities for the manufacture of Mepsevii during the fourth quarter of 2019 and as a result, we have identified an alternative supplier to conduct such activities.

It may take a significant amount of time and expense to qualify such alternative supplier and to transfer activities to such supplier, which are currently ongoing.

If we fail to qualify our alternative supplier in a timely manner, we could experience delays or disruptions in the supply of Mepsevii, which would negatively impact sales of the product.

Additionally, we may not be able to enter into supply arrangements with our alternative supplier on commercially reasonable terms or at all.

The terms of any new agreement, such as any agreement with our alternative supplier for Mepsevii, may also be less favorable or more costly than the terms we have with our current supplier.

A delay in the commercialization of our products or the development of our product candidates or having to enter into a new agreement with a different third-party on less favorable terms than we have with our current suppliers could have a material adverse impact upon on our business.

We and our collaborators and contract manufacturers are subject to significant regulation with respect to manufacturing our products and our product candidates.

The manufacturing facilities on which we rely may not continue to meet regulatory requirements or may not be able to meet supply demands.

All entities involved in the preparation of therapeutics for clinical studies or commercial sale, including our existing contract manufacturers and collaboration partners for our product and product candidates, are subject to extensive regulation.

Components of a finished therapeutic product approved for commercial sale or used in clinical studies must be manufactured in accordance with GMP.

These regulations govern manufacturing processes and procedures (including record keeping) and the implementation and operation of quality systems to control and assure the quality of investigational products and products approved for sale.

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

We, our collaborators, or our contract manufacturers must supply all necessary documentation in support of an NDA, BLA, MAA, or other application for regulatory approval, on a timely basis and must adhere to GLP, GMP, and similar regulations enforced by the FDA and other regulatory agencies through their facilities inspection programs.

Some of our contract manufacturers have never produced a commercially approved pharmaceutical product and therefore have not obtained the requisite regulatory authority approvals to do so.

The facilities and quality systems of some or all of our collaborators and third-party contractors must pass a pre-approval inspection for compliance with the applicable regulations as a condition of regulatory approval of our product candidates or any of our other potential products.

In addition, the regulatory authorities may, at any time, audit or inspect a manufacturing facility involved with the preparation of our products, product candidates or our other potential products or the associated quality systems for compliance with the regulations applicable to the activities being conducted.

If these facilities cannot schedule manufacturing to meet inspectional demands or do not initially pass and continue to pass regulatory inspections, including pre-approval plant inspections, regulatory approval of our product candidates may not be granted or may be substantially delayed until any violations are corrected to the satisfaction of the regulatory authority, if ever.

The regulatory authorities also may, at any time following approval of a product for sale, audit the manufacturing facilities of our collaborators, such as KKC, and third-party contractors.

If any such inspection or audit identifies a failure to comply with applicable regulations or if a violation of our product specifications or applicable regulations occurs independent of such an inspection or audit, we or the relevant regulatory authority may require remedial measures that may be costly and/or time consuming for us or a third-party to implement, and that may include the temporary or permanent suspension of a clinical study or commercial sales, recalls or seizures of product or the temporary or permanent closure of a facility.

Any such remedial measures imposed upon us, our collaborators, or third parties with whom we contract could materially harm our business.

If we, our collaborators, including KKC, or any of our third-party manufacturers fail to maintain regulatory compliance, the FDA or other applicable regulatory authority can impose regulatory sanctions including, among other things, refusal to approve a pending application for a new drug product or biologic product, withdrawal of an approval, or suspension of production.

As a result, our business, financial condition, and results of operations may be materially harmed.

Additionally, if supply from one approved manufacturer is interrupted, an alternative manufacturer would need to be qualified through an NDA or BLA supplement or MAA variation, or equivalent foreign regulatory filing, which could result in further delay.

The regulatory agencies may also require additional studies if a new manufacturer is relied upon for commercial production.

Switching manufacturers may involve substantial costs and is likely to result in a delay in our desired clinical and commercial timelines.

These factors could cause us to incur higher costs and could cause interruptions in the supply of our products or a delay or termination of clinical studies, regulatory submissions, required approvals, or commercialization of our product candidates.

Furthermore, if our suppliers fail to meet contractual requirements and we are unable to secure one or more replacement suppliers capable of production at a substantially equivalent cost, we could experience supply interruptions of product that would impact our ability to meet commercial demand and result in loss of revenue, or our clinical studies may be delayed, which could delay regulatory approval for our product candidates, any and all of which could materially and adversely affect our business.

The actions of distributors and specialty pharmacies could affect our ability to sell or market products profitably.

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Some of our current clinical programs may be most appropriate for patients with more severe forms of their disease.

For instance, our Phase 2 study of UX007 in LC-FAOD enrolled patients with more severe disease.

In addition, while adults make up the majority of the XLH patients, they often have less severe disease that may reduce the penetration of Crysvita in the adult population relative to the pediatric population.

For instance, while adults make up the majority of the XLH patients, they often have less severe disease that may reduce the penetration of Crysvita in the adult population relative to the pediatric population.

Given the overall rarity of the diseases we target, it is difficult to project the prevalence of the more severe forms, or the other subsets of patients that may be most suitable to address with our products and product candidates, which may further limit the addressable patient population to a small subset.

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Further, even if we obtain significant market share for our products and product candidates, because the potential target populations are very small, we may never become or remain profitable nor generate sufficient revenue growth to sustain our business.

Manufacturers that produce our products and product candidates may not have experience producing our products and product candidates at commercial levels and may not achieve the necessary regulatory approvals or produce our products and product candidates at the cost, quality, quantities, locations, and timing needed to support profitable commercialization.

We rely on third-party manufacturers to produce our products and product candidates.

These manufacturers may not have the experience or ability to produce our products and product candidates at commercial levels.

We may run into technical or scientific issues related to manufacturing or development that we may be unable to resolve in a timely manner or with available funds.

We also have not completed all of the characterization and validation activities necessary for commercialization and regulatory approvals for all of our product candidates.

If our manufacturing partners are not able to conduct all such necessary activities in accordance with applicable regulations, our commercialization efforts will be harmed.

Even if our third-party product manufacturers develop an acceptable manufacturing process, if such third-party manufacturers are unable to produce the necessary quantities of our products and product candidates, are unable to comply with GMP or other pertinent regulatory requirements, or are unable to produce our products and product candidates within our planned timeframe and cost parameters, the development and sales of our products and product candidates, if approved, may be materially harmed.

Additionally, the cost to us for the supply of our products and product candidates manufactured by such third parties may be high and could limit our profitability, even if our third-party product manufacturers develop acceptable manufacturing processes that provide the necessary quantities of our products and product candidates in a compliant and timely manner.

Furthermore, KKC is our sole supplier of commercial quantities of Crysvita.

The supply price to us for commercial sales of Crysvita in the United States, Canada and in Latin America , which is 35% of net sales through December 31, 2022 and 30% thereafter , is higher than the typical cost of goods sold by companies focused on rare diseases.

We face intense competition and rapid technological change and the possibility that our competitors may develop therapies that are similar, more advanced, or more effective than ours, which may adversely affect our financial condition and our ability to successfully commercialize our product candidates.

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We are currently aware of various existing treatments that may compete with our products and product candidates.

For example, XLH is treated with oral phosphate and vitamin D therapy, which may compete with Crysvita;

LC-FAOD is managed with diet therapy and medium-chain triglyceride oil, which may compete with UX007;

OTC deficiency is currently treated with nitrogen scavenging drugs and severe limitations in dietary protein, which may compete with DTX30;

and GSDIa is currently treated with corn starch, which may compete with DTX401.

Triheptanoin is available in food-grade form, which may compete with our pharmaceutical-grade product.

Furthermore, investigator-sponsored trials evaluating triheptanoin in multiple indications are ongoing.

Gene therapy, gene correction, RNA-based therapies, and other approaches may also emerge for the treatment of any of the disease areas in which we focus.

Business – Competition” above.

We have competitors both in the United States and internationally, including major multinational pharmaceutical companies, specialty pharmaceutical companies, biotechnology companies, startups, academic research institutions, government agencies, and public and private research institutions.

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Additionally, technologies developed by our competitors may render our potential products and product candidates uneconomical or obsolete, and we may not be successful in marketing our products and product candidates against competitors.

We continue to build and evolve an integrated commercial organization.

If we are unable to expand our existing commercial infrastructure or enter into agreements with third parties to market and sell our products and product candidates, as needed, we may be unable to generate significant revenue.

In order to successfully commercialize Crysvita and Mepsevii as well as any additional products that may result from our development programs, we are building a commercial infrastructure in North America, Europe and Latin America.

We may not be able to effectively manage the expansion of our organization, including building an integrated commercial organization.

We expect we will need additional managerial, operational, marketing, financial, legal, and other resources to support our development and commercialization plans and strategies.

In order to successfully commercialize our products as well as any additional products that may result from our development programs, we are building and expanding our commercial infrastructure in North America, Europe and Latin America.

This infrastructure consists of both office based as well as field teams with technical expertise, and will be expanded as we approach the potential approval dates of additional products that result from our development programs.

This will be expensive and time consuming.

Any failure or delay in the expansion of this infrastructure may adversely impact the commercialization of our approved products.

Although our employees may have promoted other similar products in the past while employed at other companies, we, as a company, have limited, recent experience selling and marketing our product.

Further, given our limited experience in marketing and selling biopharmaceutical products, our initial estimate of the size of the required field force may be materially more or less than the size of the field force actually required to effectively commercialize our product candidates.

Our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities.

We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our infrastructure, operational mistakes, loss of business opportunities, loss of employees, and reduced productivity among remaining employees.

Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of additional product candidates.

If our management is unable to effectively manage our growth, our expenses may increase more than expected, our ability to generate and/or grow revenue could be reduced, and we may not be able to implement our business strategy.

Our future financial performance and our ability to commercialize product candidates and compete effectively will depend, in part, on our ability to effectively manage any future growth.

We, as a company, have limited, recent experience selling and marketing our product and only some of our employees have prior experience promoting other similar products in the past while employed at other companies.

As we launch additional products or as demand for our products change, our initial estimate of the size of the required field force may be materially more or less than the size of the field force actually required to effectively commercialize our product candidates.

As such, we may be required to hire large teams to adequately support the commercialization of our products and product candidates or we may incur excess costs in an effort to optimize the hiring of commercial personnel.

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Our exclusive right to promote Crysvita in the United States and Canada expires in 2023.

Pursuant to the terms of our collaboration and license agreement with KKC, we have the sole right to promote Crysvita in the United States and Canada, or the profit-share territory, until the transition date of April 2023, which is the fifth anniversary of the commercial launch of the product in the United States.

Pursuant to the terms of our collaboration and license agreement with KKC, we have the sole right to promote Crysvita in the United States and Canada, or the profit-share territory, for a specified period of time, with KKC increasingly participating in the promotion of the product until the transition date of April 2023, which is the fifth anniversary of the commercial launch of the product in the United States.

After the transition date, KKC will have the right to promote the product, subject to a limited promotion right retained by us.

Although we expect that we will use our North America commercial infrastructure to promote our other commercialized products after the transition date, we cannot assure that we will have adequate commercial activity to support our field force and other aspects of our commercial infrastructure in the territory.

We cannot assure that we will have adequate commercial activity to support our North America field force and other aspects of our commercial infrastructure in the territory after the transition date.

After the transition date, we will also solely bear the expenses related to the promotion of Crysvita in the profit-share territory pursuant to our limited promotion right, rather than share such expenses with KKC.

We expect to collaborate with KKC to provide for a seamless transition of responsibilities for KKC to promote the product in the profit-share territory after the transition date, however, the commercial success of Crysvita in the profit-share territory after the transition date will depend on, among other things, the efforts and allocation of resources of KKC.

Collaboration with KKC may not result in a seamless transition of responsibilities for KKC to promote the product in the profit-share territory after the transition date and the commercial success of Crysvita in the profit-share territory after the transition date will depend on, among other things, the efforts and allocation of resources of KKC.

The commercial success of any current or future product will depend upon the degree of market acceptance by physicians, patients, third-party payors, and others in the medical community.

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Even if a potential product displays a favorable efficacy and safety profile in nonclinical and clinical studies, market acceptance of the product will not be fully known until after it is launched.

Our efforts to educate the medical community and payors on the benefits of the product candidates may require significant resources and may never be successful.

Our efforts to educate the medical community and payors on the benefits of the product candidates require significant resources and may never be successful.

If our current and future products fail to achieve an adequate level of acceptance by physicians, patients, payors, and others in the medical community, we will not be able to generate sufficient revenue to become or remain profitable.

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We expect to experience pricing pressures in connection with the sale of any of our products and product candidates due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, additional legislative changes, and statements by elected officials.

For example, proposals are being discussed to tie U.S.

For example, proposals have been discussed to tie U.S.

drug prices to the cost in other countries, several states in the U.S.

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House of Representatives with the goal of combating the increased costs of prescription drugs.

Drug pricing is also expected to remain a focus for the new Presidential Administration and Congress.

The downward pressure on healthcare costs in general, and with respect to prescription drugs, surgical procedures, and other treatments in particular, has become very intense.

As a result, increasingly high barriers are being erected to the entry of new products.

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

On June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the EU, commonly referred to as Brexit.

On January 30, 2020, the United Kingdom formally withdrew from the EU.

Following the United Kingdom’s formal withdrawal from the EU, the United Kingdom will to continue to follow all of the EU’s rules and its trading relationship with the EU will remain the same during a transition period which will expire on December 31, 2020.

Several aspects of the United Kingdom and EU relationship will need to be determined during the transition period, including free trade agreements and rules and regulations affecting the biotechnology or pharmaceutical industries.

Since a significant proportion of the regulatory framework in the United Kingdom is derived from EU directives and regulations, Brexit could materially impact the regulatory regime with respect to the approval of product candidates, disrupt the manufacture of our products and product candidates in the United Kingdom or the EU, disrupt the importation and export of active substances and other components of drug formulations, and disrupt the supply chain for clinical trial product and final authorized formulations.

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

The cumulative effect of disruptions to the regulatory framework or supply chains may add considerably to the development lead time to, and expense of, marketing authorization and commercialization of products in the EU and/or the United Kingdom.

In view of the uncertainty surrounding the Brexit implementation, we are unable to predict the effects of such disruption to the regulatory framework and supply chain in Europe.

Further, these developments, or the perception that any of them could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and could significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets.

Asset valuations, currency exchange rates and credit ratings may be especially subject to increased market volatility.

Lack of clarity about future U.K.

laws and regulations as the United Kingdom determines which EU laws to replace or replicate following the expiration of the transition period, including financial laws and regulations, tax and free trade agreements, intellectual property rights, supply chain logistics, environmental, health and safety laws and regulations, immigration laws and employment laws, could decrease foreign direct investment in the United Kingdom, increase costs and depress economic activity.

In addition, we expect that Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which EU laws to replicate or replace.

We are taking certain precautionary measures with respect to Brexit and its impact to the EU, and will continue to monitor the situation.

If the United Kingdom were to significantly alter its regulations affecting the biotechnology or pharmaceutical industries, we could face significant new costs.

T he United Kingdom’s withdrawal from the EU may have a negative effect on our business, global economic conditions, and financial markets.

On January 30, 2020, the United Kingdom formally withdrew from the EU, commonly referred to as Brexit, and the United Kingdom and EU subsequently entered into a trading agreement effective January 1, 2021.

In anticipation of Brexit, we had previously adjusted our product inventory and storage plans and as such, our business and operations to date have not been materially or adversely impacted by Brexit.

However, the full effects of Brexit and the impact from the trade agreement and other formal agreements between the United Kingdom and EU that may impact the regulatory framework and supply chain in Europe remain uncertain.

For instance, we expect that Brexit could lead to additional processes and steps with respect to certain regulatory applications and activities, which may impact the timing of approvals or result in additional costs.

Further, if the United Kingdom were to significantly alter its regulations affecting the biotechnology or pharmaceutical industries, we could face significant additional costs.

It may also be time-consuming and expensive for us to alter our internal operations in order to comply with new regulations.

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We rely upon a combination of patents, trade secret protection, and confidentiality agreements to protect the intellectual property related to our technologies, our products, and our product candidates.

Our success depends in large part on our and our licensors’ ability to obtain and maintain patent and other intellectual property protection in the United States and in other countries with respect to our proprietary technology, our products, and our product candidates.

We have sought to protect our proprietary position by filing patent applications in the United States and abroad related to our novel technologies and products that are important to our business.

We have sought to protect our proprietary position by filing patent applications in the United States and abroad related to our novel technologies, products and product candidates that are important to our business.

This process is expensive and time consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.

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We cannot offer any assurances about which, if any, patents will issue, the breadth of any such patent or whether any issued patents will be found invalid and unenforceable or will be threatened by third parties.

Any successful opposition to these patents or any other patents owned by or licensed to us after patent issuance could deprive us of rights necessary for the successful commercialization of any product candidates that we may develop.

Any successful opposition to these patents could impair the exclusivity position of our products or deprive us of rights necessary for the successful commercialization of any product candidates that are approved.

Further, if we encounter delays in regulatory approvals, the period of time during which we could market a product candidate under patent protection could be reduced.

Although we have a number of patents or applications covering methods of use and certain compositions of matter, we do not have complete patent protection for our products and product candidates in all territories.

Our current patents or applications covering methods of use and certain compositions of matter do not provide complete patent protection for our products and product candidates in all territories.

For example, there are no issued patents covering the Crysvita composition of matter in Latin America where we have rights to commercialize the compound.

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Although various extensions may be available, the life of a patent, and the protection it affords, is limited.

Even if patents covering our product candidates are obtained, once the patent life has expired for a product, we may be open to competition from generic medications.

While patent term extensions under the Hatch-Waxman Act in the United States and under supplementary protection certificates in Europe may be available to extend the patent exclusivity term for Crysvita, Mepsevii, UX007, DTX301, and DTX401, we cannot provide any assurances that any such patent term extension will be obtained and, if so, for how long.

Even if patents covering our product candidates are obtained, once the patent life has expired for a product, we may be open to competition from generic or biosimilar medications.

P atent term extensions under the Hatch-Waxman Act in the United States and under supplementary protection certificates in Europe may not be available to extend the patent exclusivity term for our products and product candidates , and we cannot provide any assurances that any such patent term extension will be obtained and, if so, for how long.

Furthermore, we may not receive an extension if we fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements.

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Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all.

We therefore cannot be certain that we or our licensors were the first to make the invention claimed in our owned and licensed patents or pending applications, or that we or our licensor were the first to file for patent protection of such inventions.

Assuming the other requirements for patentability are met, in the United States prior to March 16, 2013, the first to make the claimed invention is entitled to the patent, while outside the United States, the first to file a patent application is entitled to the patent.

After March 15, 2013, under the Leahy-Smith America Invents Act, or the Leahy-Smith Act, enacted on September 16, 2011, the United States has also moved to a first to file system.

The Leahy-Smith Act included a number of significant changes that affect the way patent applications are prosecuted and the way patents can be challenged.

The effects of these changes are currently unclear as the courts have only begun to address these provisions.

In general, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.

We therefore cannot be certain that we or our licensors were the first to make the invention claimed in our owned and in-licensed patents or pending applications, or that we or our licensor were the first to file for patent protection of such inventions.

In 2011, the Leahy-Smith America Invents Act (the Leahy-Smith Act) was signed into law and introduced significant changes to the prosecution of U.S.

patent applications and to the procedures for challenging U.S.

The effects of these changes still remain unclear owing to the evolving nature of the law and the lengthy timelines associated with court system review and interpretation.

However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.

If we are unable to maintain effective proprietary rights for our products, product candidates, or any future product candidates, we may not be able to compete effectively in our markets.

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However, trade secrets can be difficult to protect.

We seek to protect our proprietary technology and processes, in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors, and contractors.

We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems.

While we have confidence in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach.

The confidentiality agreements entered into with our employees, consultants, scientific advisors, and contractors may not be sufficient to protect our proprietary technology and processes.

The physical security of our premises and physical and electronic security of our information technology systems may not preserve the integrity and confidentiality of our data and trade secrets.

These individuals, organizations and systems, agreements or security measures may be breached, and we may not have adequate remedies for any breach.

In addition, our trade secrets may otherwise become known or be independently discovered by competitors.

Although we expect all of our employees and consultants to assign their inventions to us, and all of our employees, consultants, advisors, and any third parties who have access to our proprietary know-how, information, or technology to enter into confidentiality agreements, we cannot provide any assurances that all such agreements have been duly executed or that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.

The assignment agreements we enter into with our employees and consultants to assign their inventions to us, and the confidentiality agreements we enter into with our employees, consultants, advisors, and any third parties who have access to our proprietary know-how, information, or technology may not have been duly executed and we cannot assure that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.

Misappropriation or unauthorized disclosure of our trade secrets could impair our competitive position and may have a material adverse effect on our business.

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Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our products or product candidates may infringe.

We are aware of four third-party patent families that include issued U.S.

patents with claims that, if valid and enforceable, could be construed to cover one or more of our gene therapy product candidates, if and when approved, or methods of their manufacture.

We are also aware of two third-party patent families that include issued European claims that, if valid and enforceable, could be construed to cover certain methods that may be used in the manufacture of one or more of our gene therapy product candidates.

In addition, other parties may obtain patents in the future and claim that use of our technologies infringes upon these patents.

If any of these patents were held by a court of competent jurisdiction to cover aspects of our formulations, the manufacturing process of our products or any of our product candidates, methods of use, any molecules formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our ability to commercialize our products or a product candidate unless we obtained a license under the applicable patents, or until such patents expire or are finally determined to be invalid or unenforceable.

Such a license may not be available on commercially reasonable terms or at all.

We are aware of certain U.S.

and foreign patents owned by third parties that a court might construe to be relevant to one or more of our gene therapy product candidates, certain methods that may be used in their manufacture, or certain formulations comprising one or more of our gene therapy candidates.

We are also aware of certain U.S.

and foreign patents owned by third parties that relate to anti-sclerostin antibodies and their use, and which a court might construe to be relevant to setrusumab.

There is a risk that one or more of these third parties may choose to engage in litigation with us to enforce or to otherwise assert their patent rights against us.

Even if we believe such claims are without merit, a court of competent jurisdiction could hold that one or more of these patents is valid, enforceable, and infringed, in which case the owners of any such patents may be able to block our ability to commercialize a product candidate unless we obtained a license under the applicable patents, or until such patents expire.

However, such a license may not be available on commercially reasonable terms or at all.

Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to continue commercialization of our products, or block our ability to develop and commercialize one or more of our product candidates.

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If we are unable to successfully obtain rights to required third-party intellectual property rights or maintain the existing intellectual property rights we have, we may have to abandon development of that program and our business and financial condition could suffer.

We may face competition from biosimilars, which may have a material adverse impact on the future commercial prospects of Crysvita, Mepsevii, DTX301, and DTX401.

Even if we are successful in achieving regulatory approval to commercialize a product candidate faster than our competitors, we may face competition from biosimilars with respect to Crysvita, Mepsevii, DTX301, and DTX401.

We may face competition from biosimilars, which may have a material adverse impact on the future commercial prospects of our biological products and product candidates .

In the United States, the Biologics Price Competition and Innovation Act of 2009, or BPCI Act, was included in the Affordable Care Act and created an abbreviated approval pathway for biological products that are demonstrated to be “highly similar,” or biosimilar, to or “interchangeable” with an FDA-approved biological product.

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As a result, its ultimate impact, implementation, meaning, and long-term existence are subject to uncertainty.

Elimination or modification of the BPCI Act, or changes to the FDA’s interpretation or implementation of the BPCI Act, could have a material adverse effect on the future commercial prospects for Crysvita, Mepsevii, DTX301, and DTX401.

In Europe, the European Commission has granted marketing authorizations for several biosimilars pursuant to a set of general and product class-specific guidelines for biosimilar approvals issued over the past few years.

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If competitors are able to obtain marketing approval for biosimilars referencing our products, our products may become subject to competition from such biosimilars, with the attendant competitive pressure and consequences.

Additional competitors could enter the market with generic versions of our small-molecule product candidates, which may result in a material decline in sales of UX007 or future small-molecule product candidates.

Competitors could enter the market with generic versions of Dojolvi or our small-molecule product candidates, which may result in a material decline in sales of affected products.

Under the Hatch-Waxman Act, a pharmaceutical manufacturer may file an abbreviated new drug application, or ANDA, seeking approval of a generic copy of an approved innovator product.

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Notice of the certification must be given to the innovator, too, and if within 45 days of receiving notice the innovator sues to enforce its patents, approval of the ANDA is stayed for 30 months, or as lengthened or shortened by the court.

Accordingly, if UX007 is approved, competitors could file ANDAs for generic versions of UX007, or 505(b)(2) NDAs that reference UX007.

If there are patents listed for UX007 in the Orange Book, those ANDAs and 505(b)(2) NDAs would be required to include a certification as to each listed patent indicating whether the ANDA applicant does or does not intend to challenge the patent.

We cannot predict whether any patents issuing from our pending patent applications will be eligible for listing in the Orange Book, how any generic competitor would address such patents, whether we would sue on any such patents, or the outcome of any such suit.

Accordingly, competitors could file ANDAs for generic versions of our small-molecule product, Dojolvi, or 505(b)(2) NDAs that reference Dojolvi.

For the patents listed for Dojolvi in the Orange Book, those ANDAs and 505(b)(2) NDAs would be required to include a certification as to each listed patent indicating whether the ANDA applicant does or does not intend to challenge the patent.

We cannot predict how any generic competitor would address such patents, whether we would sue on any such patents, or the outcome of any such suit.

We may not be successful in securing or maintaining proprietary patent protection for products and technologies we develop or license.

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Should sales decline, we may have to write off a portion or all of the intangible assets associated with the affected product and our results of operations and cash flows could be materially and adversely affected.

The patent protection and patent prosecution for some of our product candidates is dependent on third parties.

While we normally seek and gain the right to fully prosecute the patents relating to our product candidates, there may be times when patents relating to our product candidates are controlled by our licensors.

This is the case with our agreement with KKC, who is primarily responsible for the prosecution of patents and patent applications licensed to us under the collaboration agreement.

The patent protection and patent prosecution for some of our products and product candidates is dependent on third parties.

While we normally seek and gain the right to fully prosecute the patents relating to our products or product candidates, there may be times when patents relating to our products or product candidates are controlled by our licensors.

This is the case with our agreement with KKC, who is primarily responsible for the prosecution of certain patents and patent applications covering Crysvita which are licensed to us under the collaboration agreement.

In addition, we have in-licensed patents and patent applications owned by the University of Pennsylvania, relating to the AAV8 vector used in DTX301 and DTX401.

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Moreover, REGENXBIO and the University of Pennsylvania may have interests which differ from ours in determining whether and the manner in which to enforce such patents.

If KKC, the University of Pennsylvania, or any of our future licensing partners fail to appropriately prosecute, maintain, and enforce patent protection for the patents covering any of our product candidates, our ability to develop and commercialize those product candidates may be adversely affected and we may not be able to prevent competitors from making, using, and selling competing products.

If KKC, the University of Pennsylvania, or any of our future licensing partners fail to appropriately prosecute, maintain, and enforce patent protection for the patents covering any of our products or product candidates, our ability to develop and commercialize those products or product candidates may be adversely affected and we may not be able to prevent competitors from making, using, and selling competing products.

In addition, even where we now have the right to control patent prosecution of patents and patent applications we have licensed from third parties, we may still be adversely affected or prejudiced by actions or inactions of our licensors and their counsel that took place prior to us assuming control over patent prosecution.

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If we fail to comply with our obligations under these agreements, or we are subject to a bankruptcy, we may be required to make certain payments to the licensor, we may lose the exclusivity of our license, or the licensor may have the right to terminate the license, in which event we would not be able to develop or market products covered by the license.

Additionally, the milestone and other payments associated with these licenses will make it less profitable for us to develop our drug candidates.

See “Business—License and Collaboration Agreements” above for a description of our license agreements with KKC, Baylor Research Institute, Saint Louis University, Bayer, REGENXBIO, and the University of Pennsylvania, which include descriptions of the termination provisions of these agreements.

Additionally, the milestone and other payments associated with these licenses will make it less profitable for us to develop our product candidates.

In certain cases, we control the prosecution of patents resulting from licensed technology.

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If disputes over intellectual property and other rights that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates.

Although we are not currently involved in any intellectual property litigation, we may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time consuming, and unsuccessful.

We may become involved in lawsuits to protect or enforce our patents or the patents of our licensors, or be subject to claims that challenge the inventorship or ownership of our patents or other intellectual property, which could be expensive, time consuming, and result in unfavorable outcomes.

Competitors may infringe our patents or the patents of our licensors.

Although we are not currently involved in any intellectual property litigation, if we or one of our licensing partners were to initiate legal proceedings against a third party to enforce a patent covering our products or one of our product candidates, the defendant could counterclaim that the patent covering our product or product candidate is invalid and/or unenforceable.

If we or one of our licensing partners were to initiate legal proceedings against a third party to enforce a patent covering our products or one of our product candidates, the defendant could counterclaim that the patent covering our product or product candidate is invalid and/or unenforceable.

In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace.

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Our defense of litigation, interference proceedings, or post grant proceedings under the Leahy-Smith Act may fail and, even if successful, may result in substantial costs and distract our management and other employees.

In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise sufficient capital to continue our clinical studies, continue our research programs, license necessary technology from third parties, or enter into development partnerships that would help us bring our product candidates to market.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments.

We may in the future also be subject to claims that former employees, collaborators, or other third parties have an interest in our patents as an inventor or co-inventor.

In addition, we may have ownership disputes arise from conflicting obligations of consultants or others who are involved in developing our product candidates.

Litigation may be necessary to defend against these and other claims challenging inventorship or ownership.

If we fail to successfully defend against such litigation or claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property.

Even if we are successful in defending against such litigation and claims, such proceedings could result in substantial costs and distract our management and other employees.

Because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation.

There could also be public announcements of the results of hearings, motions, or other interim proceedings or developments related to such litigation or claims.

If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock.

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We employ certain individuals who were previously employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors.

Although we try to ensure that our employees, consultants, and independent contractors do not use the proprietary information or know-how of others in their work for us, and we are not currently subject to any claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties, we may in the future be subject to such claims.

Litigation may be necessary to defend against these claims.

Our efforts to vet our employees, consultants, and independent contractors and prevent their use of the proprietary information or know-how of others in their work for us may not be successful, and we may in the future be subject to claims that our employees, consultants, or independent contractors have wrongfully used or disclosed confidential information of third parties.

If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel, which could adversely impact our business.

Even if we are successful in defending against such claims, litigation could result in substantial costs and distract management and other employees.

We may be subject to claims challenging the inventorship of our patents and other intellectual property.

Although we are not currently experiencing any claims challenging the inventorship of our patents or ownership of our intellectual property, we may in the future be subject to claims that former employees, collaborators, or other third parties have an interest in our patents or other intellectual property as an inventor or co-inventor.

For example, we may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing our product candidates.

Litigation may be necessary to defend against these and other claims challenging inventorship.

If we fail to successfully defend against such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property.

Such an outcome could have a material adverse effect on our business.

Even if we are successful in defending against such claims, litigation could result in substantial costs and distract management and other employees.

Changes in U.S.

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Risks Related to Our Business Operations

Actual or threatened public health epidemics or outbreaks, including the ongoing COVID-19 pandemic, could materially and adversely impact our business and operating results.

A public health epidemic or outbreak, and the public and governmental efforts to mitigate the spread of such disease, could materially and adversely impact the commercialization of our products, development and regulatory approval of our product candidates and our clinical trial operations and significantly disrupt our business operations as well as those of our third party suppliers, CRO and collaboration partners that we rely on.

In December 2019, a new strain of novel coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China.

In March 2020, the World Health Organization declared COVID-19 a pandemic.

Our clinical trial activities, including the initiation and completion of such activities and the timing thereof, have been and are expected to continue to be significantly delayed or disrupted by COVID-19.

For instance, enrollment of patients in certain of our clinical trials for our gene therapy product candidates have been disrupted and dosing was delayed in one of our trials.

Changes in local regulations in response to COVID-19 have also required us to change the way our clinical trials are conducted and certain data from our clinical trials were delayed as a result.

Further, healthcare resources have been and may continue to be diverted away from the conduct of clinical trials, such as the diversion of hospitals serving as our clinical trial sites, in response to the COVID-19 pandemic.

We have also had difficulties in recruiting clinical site investigators and clinical staff for our studies, and may continue to experience such difficulties.

Any of these events, including if we are required to initiate new or additional sites in response to such events, could require us to incur substantial increased expenses, delay the development and commercialization of our product candidates, delay the timing of anticipated data releases, and impact our operating results.

The COVID-19 pandemic has also impacted the timing of review of our submissions.

The FDA has delayed certain key meetings or discussions with us related to one of our product candidates, which may adversely impact the progression of our clinical study for such product candidate.

The pandemic has also significantly impacted our commercialization efforts for our products.

Social distancing measures and travel limitations have prevented our field sales and medical teams from meeting with health care professionals, customers and patients in person and it has become increasingly difficult to maintain consistent contact with our current patients or identify new patients for our commercialized products and product candidates.

Further, certain of our patients may experience interruptions in insurance coverage due to job loss or change in employment status due to the economic impact from the pandemic, which would limit patient access to our products.

Effects from government budgetary constraints, either in the United States or internationally, due to the economic impact of the pandemic, such as changes to state coverage rules under Medicaid programs in the United States, could also impact continued insurance coverage and reimbursement for our products.

Any of these events could impact our ability to commercialize our products and adversely affect our operating results and revenue.

The continuing spread of the COVID-19 pandemic has caused delays in delivery of ancillary clinical trial materials to us and may also impact the ability of our other suppliers to deliver drug product or raw materials on a timely basis, if at all, or result in increased costs or expenses.

Facility shutdowns or operational restrictions imposed by government-imposed mandates could result in supply disruptions that could impact the availability of drug product for our clinical trials as well as our commercialized products.

For instance, certain of our third party manufacturers or suppliers have prioritized and allocated more resources and capacity to supply materials to other companies engaged in the study of potential treatments or vaccinations for COVID-19, which has resulted in delays or shortages in supply of such materials to us.

Any of these events could adversely impact our clinical trial activities and our ability to meet commercial demand for our product and product candidates and result in loss of revenue.

In response to these events, we are currently seeking alternative sources of supply of drug product or raw materials in an attempt to avoid future potential delays in supply of product, which may result in additional expenses.

In an effort to protect the health of our employees, their families and our communities, and in accordance with shelter-in-place direction from state and local government authorities, we have restricted access to our facilities to personnel and third parties who must perform critical activities that must be completed on-site, limited the number of such personnel that can be present at our facilities at any one time, and requested that most of our personnel work remotely, including significant limitations on access to our laboratory space.

The effects of the shelter-in-place and our remote working policies may negatively impact productivity and disrupt our business operations.

Further, notwithstanding these measures, the COVID-19 pandemic could affect the health and availability of our workforce, including members of our management.

If members of our management and other key personnel in critical functions across our organization are unable to perform their duties or have limited availability due to illness from COVID-19, we may not be able to execute on our business strategy and/or our operations may be negatively impacted.

Further, the safety protocols we may implement may not prevent employees from contracting COVID-19 at the workplace if and when we ease restrictions to our facilities and our employees return to work on-site.

The magnitude of the adverse effect on our business operations will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course.

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets, which could adversely impact our operating results.

For instance, delays or defaults in payments by our customer and third-party partners could adversely impact our accounts receivables.

The value of our investments currently held in a variety of accounts could also be negatively impacted by the volatility in certain markets, such as the fixed income market, and impact our sources of liquidity.

The stock market in general and the stock price of biopharmaceutical companies, in particular, have also experienced extreme price and volume fluctuations.

Broad market and industry factors, including worsening economic conditions or a recession resulting from the ongoing COVID-19 pandemic, may adversely impact the value of our common stock and our ability to raise capital.

If we do raise additional capital and issue equity securities when the value of our common stock is depressed, the dilutive impact on our stockholders may be greater compared to when the value of our common stock is higher.

The COVID-19 pandemic has already impacted our operations and those of our third-party partners.

The magnitude and extent to which the outbreak may impact or continue to impact our business operations, clinical trial activities, product candidate approvals, supply chain and commercialization of our products and product candidates will continue to remain highly dependent on future developments, which are very uncertain and cannot be predicted with confidence, such as the duration of the outbreak, the scope and magnitude of any resurgence in the outbreak due to virus mutations or other factors, the timing and availability of treatments and vaccines against the virus, the duration of, or implementation of additional, restrictions to contain the outbreak and the effectiveness of other actions taken in the United States and other countries to contain and address the pandemic.

This pandemic may also amplify many of the other risks described throughout the “Risk Factors” section of this Annual Report on Form 10-K.

Our future success depends in part on our ability to retain our Founder, President, and Chief Executive Officer and to attract, retain, and motivate other qualified personnel.

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As a result, competition for skilled personnel is intense and the turnover rate can be high.

We may not be able to attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for individuals with similar skill sets.

Our investments and efforts in human capital management may not attract and retain personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for individuals with similar skill sets.

In addition, failure to succeed in preclinical or clinical studies may make it more challenging to recruit and retain qualified personnel.

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If we do not obtain orphan drug exclusivity for our drug products and biologic products that do not have broad patent protection, our competitors may then sell the same drug to treat the same condition sooner than if we had obtained orphan drug exclusivity, and our revenue will be reduced.

Even though we have orphan drug designation for UX007 for the treatment of fatty acid oxidation disorders in the United States and for various subtypes of LC-FAOD in Europe, as well as for Crysvita, Mepsevii, DTX301 and DTX401 in the United States and Europe, we may not be the first to obtain marketing approval for any particular orphan indication due to the uncertainties associated with developing pharmaceutical products.

Even though we have orphan drug designation for Dojolvi for the treatment of fatty acid oxidation disorders in the United States and for various subtypes of LC-FAOD in Europe, as well as for Crysvita, Mepsevii, DTX301, DTX401 and UX701 in the United States and Europe, we may not be the first to obtain marketing approval for any particular orphan indication due to the uncertainties associated with developing pharmaceutical products.

Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties can be approved for the same condition or the same drug can be approved for a different indication unless there are other exclusivities such as new chemical entity exclusivity preventing such approval.

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Orphan drug designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process.

We will need to expand our organization and we may experience difficulties in managing this growth, which could disrupt our operations.

As our development and commercialization plans and strategies develop, we expect to need additional managerial, operational, field forces, marketing, financial, legal, and other resources.

Our management may need to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities.

Our expected growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of additional product candidates.

Our future financial performance and our ability to commercialize product candidates and compete effectively will depend, in part, on our ability to effectively manage any future growth.

Our operating results would be adversely impacted if our intangible assets become impaired.

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(Dimension) in November 2017, we have recorded on our balance sheet intangible assets for in-process research and development (IPR&D) related to DTX301 and DTX401.

Following the FDA approval of Dojolvi in June 2020, we have also recorded contract-based intangible assets related to our license from third parties for certain assets related to the product.

We test the intangible assets for impairment annually during the fourth quarter and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired.

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We may not be successful in our efforts to identify, license, discover, develop, or commercialize additional product candidates.

Although a substantial amount of our effort will focus on the continued clinical testing, potential approval, and commercialization of our existing product candidates, the success of our business also depends upon our ability to identify, license, discover, develop, or commercialize additional product candidates.

The success of our business depends upon our ability to identify, license, discover, develop, or commercialize additional product candidates in addition to the continued clinical testing, potential approval, and commercialization of our existing product candidates.

Research programs to identify and develop new product candidates, such as those under our collaboration with Arcturus, require substantial technical, financial, and human resources.

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Because we have limited financial and managerial resources, we focus our sales, marketing and research programs on certain products, product candidates or for specific indications.

As a result, we may forego or delay pursuit of opportunities with other

products or product candidates or other indications that later prove to have greater commercial potential.

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

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

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

If we are unable to maintain and further develop effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our stock may decrease.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures.

In particular, we are required to perform system and process evaluation and testing of our internal controls over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting, as required by Section 404(a) of the Sarbanes-Oxley Act.

We are also subject to the compliance requirements of Section 404(b) of the Sarbanes-Oxley Act, which results in us incurring substantial expenses and expending significant management efforts.

We currently do not have a separate internal audit group.

We may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge.

If we are not able to comply with the requirements of Section 404(b) or if we or our independent registered public accounting firm identify deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our stock could decline and we could be subject to sanctions or investigations by Nasdaq, the SEC, or other regulatory authorities, which would require additional financial and management resources.

Changes to healthcare and FDA laws, regulations, and policies may have a material adverse effect on our business and results of operations.

United States

In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs and to modify the regulation of drug and biologic products.

For example, the Affordable Care Act, as amended, substantially changed the way health care is financed by both governmental and private insurers, and significantly impacts the U.S.

pharmaceutical industry.

The Affordable Care Act, among other things, subjects biologic products to potential competition by lower-cost biosimilars, addresses 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, increases the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid managed care organizations, and establishes annual fees and taxes on manufacturers of certain branded prescription drugs.

A federal district court ruled the entire Affordable Care Act to be unconstitutional in December 2018, but issued a stay, meaning the law will remain in effect while the ruling is appealed.

Implementation of the Affordable Care Act remains ongoing, but there is uncertainty as to how the law’s various provisions will ultimately affect the industry and whether the law will remain in place.

Other legislative changes have been adopted in the United States, including the Cures Act and the Budget Control Act of 2011, or the Budget Act, signed into law on August 2, 2011.

The Cures Act introduced a wide range of reforms and the Budget Act, among other things, required reductions in federal spending, which eventually triggered Medicare sequestration—the requirement to reduce Medicare payments to providers up to 2% per fiscal year.

In 2013, the 2% Medicare payment reductions were applied to fee-for-service claims with dates of service or dates of discharge on or after April 1, 2013.

Sequestration was initially set to expire in fiscal year 2021 but has been extended to 2025.

As described above under “Item 1.

Business - Government Regulation” and in the Risk Factor above entitled “ – The insurance coverage and reimbursement status of newly approved products is uncertain ” there have been and continue to be a number of legislative initiatives to contain healthcare costs and to modify the regulation of drug and biologic products.

We expect that additional state and federal healthcare reform measures and regulations will be adopted in the future, including proposals to reduce the exclusivity protections provided to already approved biological products and to provide biosimilar and interchangeable biologic products an easier path to approval.

Any of these measures and regulations could limit the amounts that federal and state governments will pay for healthcare products and services, result in reduced demand for our product candidates or additional pricing pressures and affect our product development, testing, marketing approvals and post-market activities.

In the EU, the European Commission has adopted detailed rules for the safety features appearing on the packaging of medicinal products for human use.

The regulations set forth the rules for the features appearing on the packaging of these medicinal products, including, inter alia, the characteristics and technical specifications of the unique identifier that enables the authenticity of medicinal products to be verified and individual packs to be identified, the modalities for the verification of the safety features, and the list of medicinal products and product categories subject and not subject to prescription which shall not bear and bear (respectively) safety features.

The European Commission has also launched a series of public consultations that are aimed at the adoption of notices and guidelines which will serve the interpretation of currently applicable regulations and directives.

For example, between August 2015 and December 2016, the European Commission launched public consultations which concerned good manufacturing practices, clinical trials for human medicinal products, and orphan medicinal products.

The purpose of the consultation on orphan medicinal products (which will be replaced with a Notice) is to streamline the regulatory framework and to adapt the applicable regulations to technical progress.

The consultation focuses on a variety of elements of Regulation (EC) No 141/2000, which include the encouragement of development of orphan medicinal products for communicable diseases and the simplification of the procedure for the reassessment of orphan criteria when two authorization application procedures are pending in parallel for two orphan medicinal products.

We are subject, directly and indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, and health information privacy and security laws.

If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

Our operations are directly, and indirectly through our customers, subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims Act, and physician sunshine laws and regulations.

These laws impact, among other things, our field marketing and education programs.

In addition, we are subject to patient privacy regulation by both the federal government and the states in which we conduct our business.

The laws that may affect our ability to operate, including the EU General Data Protection Regulation, are described under “Business—Government Regulation” above.

Further, in the United States, California recently enacted the California Consumer Privacy Act (CCPA), which became effective on January 1, 2020.

The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used.

The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.

Failure to comply with laws and regulations could harm our business and our reputation.

Our business is subject to regulation by various federal, state, local and foreign governmental agencies, including agencies responsible for monitoring and enforcing employment and labor laws, workplace safety, and tax laws and regulations.

In certain jurisdictions, these regulatory requirements may be more stringent than those in the United States, and in other circumstances these requirements may be more stringent in the United States.

In particular, o ur operations are directly, and indirectly through our customers, subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims Act, and physician sunshine laws and regulations and patient privacy regulations, including the EU General Data Protection Regulation and the California Consumer Privacy Act (CCPA), as described above under “Item 1.

Business – Government Regulation”.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws .

If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from participation in government health care programs, such as Medicare and Medicaid, imprisonment, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

We may also incur increased costs as a result of complying with new legislations such as the CCPA.

For instance, as we and our employees increasingly use social media tools as a means of communication with the public, there is a risk that the use of social media by us or our employees to communicate about our products or business may cause to be found in violation of applicable laws, despite our attempts to monitor such social media communications through company policies and guidelines.

In addition, our employees may knowingly or inadvertently make use of social media in ways that may not comply with our company polic ies or other legal or contractual requirements, which may give rise to liability, lead to the loss of trade secrets or other intellectual property, or result in public exposure of personal information of our employees, clinical trial patients, customers, and others.

If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from participation in government health care programs, such as Medicare and Medicaid, imprisonment, disgorgement of profits, and the curtailment or restructuring of our operations.

If any governmental sanctions, fines or penalties are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, operating results, financial condition and our reputation could be harmed.

In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in professional fees .

Our research and development activities, including our process and analytical development activities in our quality control laboratory, and our and our third-party manufacturers’ and suppliers’ activities involve the controlled storage, use, and disposal of hazardous materials, including the components of our product candidates, such as viruses, and other hazardous compounds, which subjects us to laws and regulations governing such activities.

In some cases, these hazardous materials and various wastes resulting from their use are stored at our or our manufacturers’ facilities pending their use and disposal.

We cannot eliminate the risk of contamination, which could cause an interruption of our commercialization efforts, research and development efforts, and business operations or environmental damage that could result in costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling, and disposal of these materials and specified waste products.

We cannot guarantee that the safety procedures utilized by us and our third-party manufacturers for handling and disposing of these materials comply with the standards prescribed by these laws and regulations, or eliminate the risk of accidental contamination or injury from these materials.

In such an event, we may be held liable for any resulting damages—and such liability could exceed our resources—and state or federal or other applicable authorities may curtail our use of certain materials and/or interrupt our business operations.

Furthermore, environmental laws and regulations are complex, change frequently, and have tended to become more stringent.

We cannot predict the impact of such changes and cannot be certain of our future compliance.

We do not currently carry biological or hazardous waste insurance coverage.

International expansion of our business exposes us to business, regulatory, political, operational, financial, and economic risks associated with doing business outside of the United States.

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financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products, and exposure to foreign currency exchange rate fluctuations;

natural disasters and political and economic instability, including wars, terrorism, political unrest, results of certain elections and votes, actual or threatened public health emergencies and outbreak of disease (including for example, the recent coronavirus outbreak), boycotts, adoption or expansion of government trade restrictions, and other business restrictions;

natural disasters and political and economic instability, including wars, terrorism, political unrest, results of certain elections and votes, actual or threatened public health emergencies and outbreak of disease (including for example, the COVID-19 pandemic), boycotts, adoption or expansion of government trade restrictions, and other business restrictions;

certain expenses including, among others, expenses for travel, translation, and insurance;

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Any of these factors could significantly harm our future international expansion and operations and, consequently, our results of operations.

We may incur additional tax liabilities related to our operations.

We have a multinational tax structure and are subject to income tax in the United States and various foreign jurisdictions.

Our effective tax rate is influenced by many factors including changes in our operating structure, changes in the mix of our earnings among countries, our allocation of profits and losses among our subsidiaries, our intercompany transfer pricing agreements and rules relating to transfer pricing, the availability of U.S.

research and development tax credits, and future changes in tax laws and regulations in the U.S.

and foreign countries.

Significant judgment is required in determining our tax liabilities including management’s judgment for uncertain tax positions.

The Internal Revenue Service, other domestic taxing authorities, or foreign taxing authorities may disagree with our interpretation of tax laws as applied to our operations.

Our reported effective tax rate and after-tax cash flows may be materially and adversely affected by tax assessments in excess of amounts accrued for our financial statements.

This could materially increase our future effective tax rate thereby reducing net income and adversely impacting our results of operations for future periods.

Failure to comply with laws and regulations could harm our business and our reputation.

Noncompliance with applicable regulations or requirements could subject us to investigations, sanctions, mandatory recalls, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties, or injunctions.

In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in professional fees.

Enforcement actions and sanctions could further harm our business, operating results, financial condition, and our reputation.

In particular, our research and development activities and our and our third-party manufacturers’ and suppliers’ activities involve the controlled storage, use, and disposal of hazardous materials, including the components of our product candidates, such as viruses, and other hazardous compounds, which subjects us to laws and regulations governing such activities.

In some cases, these hazardous materials and various wastes resulting from their use are stored at our or our manufacturers’ facilities pending their use and disposal.

Furthermore, environmental laws and regulations are complex, change frequently, and have tended to become more stringent.

We cannot predict the impact of such changes and cannot be certain of our future compliance.

We do not currently carry biological or hazardous waste insurance coverage.

Risks generally associated with a company-wide implementation of an enterprise resource planning (ERP) system may adversely affect our business and results of operations or the effectiveness of our internal controls over financial reporting.

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Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.

Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, are vulnerable to damage from computer viruses, unauthorized access, cyber-attacks, natural disasters, fire, terrorism, war, and telecommunication and electrical failures.

Improper or inadvertent employee behavior, including data privacy breaches by employees and others with permitted access to our systems, may also pose a risk that sensitive data may be exposed to unauthorized persons or to the public.

Our security measures, internal computer systems, and those of our CROs and other third parties on which we rely, are vulnerable to damage from computer viruses, unauthorized access, cyber-attacks, natural disasters, fire, terrorism, war, and telecommunication and electrical failures.

Risks of unauthorized access and cyber-attacks have increased as most of our personnel, and the personnel of many third-parties with which we do business, have adopted remote working arrangements as a result of the COVID-19 pandemic.

Improper or inadvertent employee behavior, including data privacy breaches by employees, contractors and others with permitted access to our systems, may also pose a risk that sensitive data may be exposed to unauthorized persons or to the public.

If a system failure or security breach occurs and interrupts our operations or the operations at one of our third-party vendors, it could result in intellectual property and other proprietary or confidential information being lost or stolen or a material disruption of our drug development programs.

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We may also be vulnerable to cyber-attacks by hackers or other malfeasance.

This type of breach of our cybersecurity may compromise our confidential information and/or our financial information and adversely affect our business or reputation or result in legal proceedings.

This type of breach of our cybersecurity may compromise our confidential information and/or our financial information and adversely affect our business or reputation or result in legal or regulatory proceedings.

We or the third parties upon whom we depend may be adversely affected by earthquakes or other natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

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We may incur substantial expenses as a result of the limited nature of our 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.

We may acquire companies or products or engage in strategic transactions, which could divert our management’s attention and cause us to incur various costs and expenses.

We may acquire companies or products or engage in strategic transactions, which could divert our management’s attention and cause us to incur various costs and expenses , or result in fluctuations with respect to the value of such investment, which could impact our operating results .

We may acquire or invest in businesses or products that we believe could complement or expand our business or otherwise offer growth opportunities.

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Such potential transactions may divert the attention of management and may cause us to incur various costs and expenses in investigating and evaluating such transactions, whether or not they are consummated.

Litigation may substantially increase our costs and harm our business.

We have been, and may in the future become, party to lawsuits including, without limitation, actions and proceedings in the ordinary course of business relating to our directors, officers, stockholders, intellectual property, and employment matters, which will cause us to incur legal fees and other costs related thereto, including potential expenses for the reimbursement of legal fees of officers and directors under indemnification obligations.

The expense of defending against such litigation may be significant and there can be no assurance that we will be successful in any defense.

Further, the amount of time that may be required to resolve such lawsuits is unpredictable, and these actions may divert management’s attention from the day-to-day operations of our business, which could adversely affect our business, results of operations, and cash flows.

Litigation is subject to inherent uncertainties, and an adverse result in such matters that may arise from time to time could have a material adverse effect on our business, results of operations, and financial condition.

The value of our investments in other companies or businesses may also fluctuate significantly and impact our operating results quarter to quarter or year to year.

For instance, in June 2019, we purchased 2.4 million shares of common stock of Arcturus and in May 2020, we exercised our option to purchase an additional 600,000 shares of Arcturus’ common stock pursuant to the terms of our equity purchase agreement with Arcturus;

we subsequently sold an aggregate of 800,000 shares in December 2020.

We also purchased 7,825,797 shares of common stock of Solid in October 2020.

We have elected to apply the fair value option to account for our equity investments in Arcturus and Solid.

As a result, increases or decreases in the stock price of Arcturus and Solid common stock will result in accompanying changes in the fair value of our investments, and cause substantial volatility in, our operating results for the reporting period.

For instance, the changes in fair value of the Arcturus and Solid investments recognized in the Consolidated Statements of Operations for the years ended December 31, 2020 and 2019 was a $170.4 million and $13.4 million increase, respectively, primarily due to the higher Arcturus and Solid stock price as of December 31, 2020 and 2019 compared to the prior year for Arcturus and the acquisition date for Solid.

The gains in fair value of the equity investments for the years ended December 31, 2020 and 2019 decreased the amount of our net loss during those periods.

If the Arcturus or Solid stock price had been lower at December 31, 2020 and 2019 compared to the prior year or the acquisition date, as applicable, we would have reported an even greater net loss for the years ended December 31, 2020 and 2019.

As the fair value of our investments in Arcturus and Solid is dependent on the stock price of Arcturus and Solid, which has recently seen wide fluctuations, the value of our investments and the impact on our operating results may similarly fluctuate significantly from quarter to quarter and year to year such that period-to-period comparisons may not be a good indication of the future value of the investments and our future operating results.

Risks Related to Ownership of Our Common Stock

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changes in the market valuations of similar companies;

general market or macroeconomic conditions;

general market or macroeconomic conditions, including the impact from the COVID-19 pandemic;

sales of our common stock by us or our stockholders in the future;

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Through January 1, 2024, the number of shares available for issuance under the 2014 ESPP will automatically increase on January 1 of each year by the lesser of 1,200,000 shares or 1% of all shares of our capital stock outstanding as of December 31 of the prior calendar year, subject to the ability of our compensation committee to take action to reduce the size of the increase in any given year.

Currently we plan to register the increased number of shares available under the 2014 Plan and the 2014 ESPP each year.

If our board of directors elects to increase the number of shares available for future grant under the 2014 Plan or the 2014 ESPP, our stockholders may experience additional dilution, which could cause our stock price to fall.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

We have incurred substantial losses during our history.

To the extent that we continue to generate taxable losses, unused taxable losses will, subject to certain limitations, carry forward to offset future taxable income, if any, until such unused losses expire.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the IRC, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards, or NOL carryforwards, and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited.

An analysis to determine limitations upon our NOL carryforwards and other pre-change tax attributes for ownership changes that have occurred previously has been performed, resulting in a permanent decrease of federal and state NOL carryforwards in the amount of $7.2 million and a permanent decrease in federal research tax credit carryforwards in the amount of $0.2 million.

As a result of these decreases and others that may occur as a result of future ownership changes, our ability to use our pre-change NOL carryforwards and other tax attribute carryforwards to offset U.S.

federal taxable income and tax liabilities is limited and may become subject to even greater limitations, which could potentially accelerate or permanently increase future federal tax liabilities for us.

In addition, there may be periods during which the use of state income tax NOL carryforwards and other state tax attribute carryforwards (such as state research tax credits) are suspended or otherwise limited, which could potentially accelerate or permanently increase future state tax liabilities for us.

In February 2021, our board of directors adopted an employment inducement plan with a maximum of 500,000 shares available for grant under the plan.

We plan to register all the shares under our inducement plan.

In addition, we currently plan to register the increased number of shares available under the 2014 Plan and the 2014 ESPP each year.

If our board of directors elects to increase the number of shares available for future grant under the 2014 Plan, the 2014 ESPP or the inducement plan, our stockholders may experience additional dilution, which could cause our stock price to fall.

We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.

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

General Risk Factors

If we are unable to maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our stock may decrease.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures.

Section 404(b) of the Sarbanes-Oxley Act also requires our independent auditors to attest to, and report on, this management assessment.

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

If we are not able to comply with the requirements of Section 404 or if we or our independent registered public accounting firm are unable to attest to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our stock could decline and we could be subject to sanctions or investigations by Nasdaq, the SEC, or other regulatory authorities, which would require additional financial and management resources.

We may incur additional tax liabilities related to our operations.

We have a multinational tax structure and are subject to income tax in the United States and various foreign jurisdictions.

research and development tax credits, and future changes in tax laws and regulations in the U.S.

and foreign countries.

Significant judgment is required in determining our tax liabilities including management’s judgment for uncertain tax positions.

The Internal Revenue Service, other domestic taxing authorities, or foreign taxing authorities may disagree with our interpretation of tax laws as applied to our operations.

Our reported effective tax rate and after-tax cash flows may be materially and adversely affected by tax assessments in excess of amounts accrued for our financial statements.

This could materially increase our future effective tax rate thereby reducing net income and adversely impacting our results of operations for future periods.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

We have incurred substantial losses during our history.

Litigation may substantially increase our costs and harm our business.

The expense of defending against such litigation may be significant and there can be no assurance that we will be successful in any defense.

Unresolved Staff Comments

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

What changed 10-K

Item 1A. Risk Factors