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Item 1A. Risk Factors

2022-03-17 compared with 2021-03-31 · 464 added, 560 removed, 497 unchanged (67% of the section changed)

Our business has significant risks.

You should consider carefully the risks described below, together with the other information contained in this Report, including our financial statements and the related notes.

If any of the following risks occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected.

Below is a summary of the principal factors that make an investment in our common stock speculative or risky.

This summary does not address all of the risks that we face.

Additional discussion of the risks we face can be found in this Item 1A, beginning under the heading “Risk Related to our Financial Position and Need for Additional Capital”.

Such risks should be carefully considered, together with other information in this Form 10-K and our other filings with the SEC, before making an investment decision regarding our common stock.

• We have incurred significant losses since our inception and we expect to incur losses for the foreseeable future.

• We will require substantial additional capital to fund our operations and if we fail to obtain necessary financing we will not be able to complete the development and commercialization of our product candidates.

• We depend heavily on the success of our lead product candidate, ridinilazole, which we are developing for the treatment of CDI.

If we are unable to commercialize ridinilazole, or experience significant delays in doing so, our business will be materially harmed.

• Our reliance on government funding for ridinilazole adds uncertainty to our research and commercialization efforts, and may impose requirements that increase the costs of commercialization and production of product candidates developed with the support of government-funded programs in which we participate.

• The novel coronavirus pandemic (COVID-19) and the response to it have led to many clinical trial sites slowing or stopping enrollment into our Phase 3 clinical trials, which have delayed our efforts to obtain approval for ridinilazole and consequently may delay our receipt of necessary marketing approvals.

• We face substantial competition, which may result in others discovering, developing or commercializing products before us or more successfully than we do.

• Our ability to commercialize any of our product candidates is subject to substantial regulatory and legislative uncertainty, including as to pricing, reimbursement practices or other healthcare initiatives which could harm our business.

• We can provide no assurance that our clinical product candidates will obtain regulatory approval or that the results of clinical studies will be favorable.

• Drug discovery and development is a complex, time-consuming and expensive process that is fraught with risk and a high rate of failure.

• We depend on our senior management and key personnel for our success, and if we fail to retain such personnel we may experience substantial harm to our business.

• We rely upon patents to protect our technology.

We may be unable to protect our intellectual property rights and we may be liable for infringing the intellectual property rights of others.

• We depend on collaborations with third parties for the development and commercialization of some of our product candidates.

If those collaborations are not successful, we may not be able to capitalize on the market potential of these product candidates.

• We may face costly legal claims, in particular related to product liability and intellectual property infringement.

• Our Chief Executive Officer owns more than a majority of the voting power of the outstanding shares of our common stock, and as a result investors may have limited ability to affect either the corporate governance of the Company or the taking of certain major decisions.

• Substantial future sales of our shares of common stock in the public market, or the perception that these sales could occur, could cause the price of the shares to decline significantly, even if our business is doing well.

• The prices of our shares of common stock may be volatile and fluctuate substantially, which could result in substantial losses for our stockholders.

• We are subject to certain U.S., U.K.

and foreign anti-corruption, anti-money laundering, export control, sanctions and other trade laws and regulations.

We can face serious consequences for violations.

This section describes certain risks we face in our business.

Additional risks we do not yet know of or that we currently believe are immaterial may also impair our business.

If any of the events or circumstances described in this section actually occurs, our business, financial condition or operating results could suffer, and the market price of our common stock could decline.

In assessing these risks, investors should also refer to the other information contained or incorporated by reference in this report and our other filings with the Securities and Exchange Commission.

Risks Related to our Financial Position and Need for Additional Capital

We have incurred significant losses since our inception.

We depend heavily on the success of our product candidates.

We may not be able to identify third-party partnership opportunities with whom to commercialize our product candidates.

If we are unable to successfully commercialize our product candidates through a partnership, or experience significant delays in doing so, we may extend the period in which we will incur significant financial losses as an organization.

We plan to seek one or more third party partnership arrangements for potential additional clinical development and commercialization of our lead product candidate, ridinilazole, which we are developing for the treatment of CDI.

Our ability to generate revenues from these arrangements will depend on our partners' abilities and efforts to successfully perform the functions assigned to them in these arrangements.

If we are unable to establish a partnership, or if such a partnership is not successful, we may not be able to capitalize on the market potential of these product candidates.

Third party partnerships involving our product candidates pose a number of risks, including the following:

• third-party partners have significant discretion in determining the amount and timing of efforts and resources that they will apply to these third-party partnerships;

• third-party partners may not perform their obligations as expected;

• third-party partners may not pursue commercialization and development of our product candidates that receive marketing approval or may elect not to continue or renew commercialization or development programs based on clinical trial results, changes in the partners' strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities;

• third-party partners may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;

• third-party partners could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates if the partners believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;

• product candidates discovered under third-party partnerships with us may be viewed by our third-party partners as competitive with their own product candidates or products, which may cause partners or licensees to cease to devote resources to the commercialization of our product candidates;

• a third-party partner with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of such product or products;

• disagreements with third-party partners, including disagreements over proprietary rights, contract interpretation or the preferred course of development, might cause delays or termination of the research, development or commercialization of product candidates, might lead to additional responsibilities for us with respect to product candidates, or might result in litigation or arbitration, any of which would divert management attention and resources, be time-consuming and expensive;

• third-party partners may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation;

• third-party partners may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability;

• third-party partners may be terminated for the convenience of the third-party partner and, if terminated, we could be required to raise additional capital to pursue further development or commercialization of the applicable product candidates.

Third-party partnership agreements may not lead to commercialization or development of product candidates in the most efficient manner, or at all.

If any partnerships that we enter into, do not result in the successful commercialization and development of products or if one of our partners terminates its agreement with us, we may not receive any future research funding or milestone or royalty payments under the commercialization partnership.

Additionally, if one of our partners

terminates its agreement with us, we may find it more difficult to attract new partners and our perception in the business and financial communities could be harmed.

We are a development-stage company and have incurred significant losses since our inception.

We expect to incur losses for at least the next several years and may never generate profits from operations or maintain profitability.

We are a development-stage company and we cannot assure profitability.

We expect to continue to generate operating losses for the foreseeable future.

Until we can generate substantial revenue and achieve profitability, we will need to raise additional capital to fund ongoing operations and capital needs.

Since inception, we have incurred significant operating losses.

Our net loss was approximately $52.7 million for the fiscal year ended December 31, 2020, our net loss was approximately $29.1 million for the eleven months ended December 31, 2019, and our net income was approximately $10.9 million for the year ended January 31, 2019.

As of December 31, 2020, we had an accumulated deficit of $210.9 million.

The net income recorded for the year ended January 31, 2019, was due to the recognition

of all remaining deferred revenue related to our license and collaboration agreement with Sarepta Therapeutics, Inc., or Sarepta, following our decision to discontinue the development of ezutromid in June 2018.

This recognition of deferred revenues did not impact our cash flows.

To date, we have financed our operations primarily through issuances of our common stock, and, prior to the domestication, issuances of Summit Therapeutics plc’s ordinary shares and American Depositary Shares, or ADSs, payments to us under our now-terminated license and collaboration agreement with Sarepta, payments to us under our license and commercialization agreement with Eurofarma Laboratórios SA, or Eurofarma, and development funding and other assistance from government entities, philanthropic, non-government and not for profit organizations and patient advocacy groups for our product candidates.

We have devoted substantially all of our efforts to research and development, including clinical trials.

We have not completed development of any drugs.

We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.

The net losses we incur may fluctuate significantly from quarter to quarter and year to year.

We anticipate that our expenses will increase substantially in connection with conducting clinical trials for our lead product candidate, ridinilazole (formerly SMT19969), for the treatment of patients with Clostridioides difficile infection (formerly known as Clostridium difficile infection), or CDI, and seeking marketing approval for ridinilazole in the United States, as well as other geographies.

In addition, if we obtain marketing approval of ridinilazole in the United States or other jurisdictions where we retain commercial rights, we expect to incur significant sales, marketing, distribution and outsourced manufacturing expenses, as well as ongoing research and development expenses.

In addition, our expenses will increase if and as we:

• continue the research and development of ridinilazole, as well as our early-stage programs targeting infections caused by Enterobacteriaceae;

• seek to identify and develop additional product candidates, including through our bacterial genetics-based discovery and development platform, which we refer to as our Discuva Platform, for discovering and developing new mechanism antibiotics;

• seek marketing approvals for any product candidates that successfully complete clinical development;

• ultimately establish a sales, marketing and distribution infrastructure in jurisdictions where we have retained commercialization rights and scale up external manufacturing capabilities to commercialize any product candidates for which we receive marketing approval;

• acquire or in-license other product candidates and technology;

• maintain, expand and protect our intellectual property portfolio;

• hire additional clinical, regulatory and scientific personnel;

• expand our physical presence;

• add operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts.

Our ability to generate income from operations and remain profitable depends on our ability to successfully develop and commercialize drugs that generate significant revenue.

Based on our current plans, we do not expect to generate significant product sales revenue unless and until we obtain marketing approval for, and commercialize, ridinilazole for the treatment of CDI or any other product candidates we develop.

This will require us to be successful in a range of challenging activities, including:

• successfully initiating and completing clinical trials of ridinilazole for the treatment of CDI and any other product candidates we develop;

• obtaining approval to market ridinilazole for the treatment of CDI and any other product candidates we develop;

• protecting our rights to our intellectual property portfolio related to ridinilazole and any other product candidates we develop;

• contracting for the manufacture of clinical and commercial quantities of ridinilazole and any other product candidates we develop;

• negotiating and securing adequate reimbursement from third-party payors for ridinilazole and any other product candidates we develop;

• establishing sales, marketing and distribution capabilities to effectively market and sell ridinilazole and any other product candidates we develop in the United States, as well as other geographies.

We may never succeed in these activities and, even if we do, may never generate revenues that are significant enough to generate income from operations.

Even if we do generate income from operations, we may not be able to sustain or increase profitability on a quarterly or annual basis.

Our failure to generate income from operations and remain profitable would decrease the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or continue our operations.

A decline in the value of our company could also cause you to lose all or part of your investment.

During year ended December 31, 2021, we incurred a net loss of $88.6 million, and cash flows used in operating activities was $72.6 million.

As of December 31, 2021, we had an accumulated deficit of $299.5 million, cash of $71.8 million, research and development tax credits of $15.7 million and accounts receivable of $1.5 million.

Based on our current funding arrangements and financial resources as of December 31, 2021 and after considering proceeds received of $25.0 million from the 2022 Note issued on March 10, 2022, the Company has the ability to funds its operating costs and working capital needs into the second half of 2023.

We expect to continue to generate operating losses for the foreseeable future.

Until we can generate substantial revenue and achieve profitability, we will need to raise additional capital to fund ongoing operations and capital needs.

To date, we have financed our operations primarily through issuances of our common stock (and before the Redomiciliation Transaction issuances of Summit Therapeutics plc’s ordinary shares and American Depositary Shares), payments to us under our license and commercialization agreement with Eurofarma, and development funding and other assistance from government entities, philanthropic, non-government and not for profit organizations.

In particular, we have received funding from BARDA, CARB-X, Innovate UK, Wellcome Trust and a number of not-for-profit organizations.

We have devoted substantially all of our financial resources and efforts to developing our lead product candidate, ridinilazole, for the treatment of CDI, identifying potential product candidates, and conducting preclinical studies and clinical trials.

We expect to continue to incur significant expenses and operating losses for the foreseeable future.

We anticipate that our expenses may increase substantially as we:

• conclude and assess our Ri-CoDIFy Phase III trial's data for our lead product candidate, ridinilazole, for the treatment of CDI and consider the future path forward, including potential partnership opportunities;

• conduct research and continue preclinical development of additional product candidates;

• maintain and augment our intellectual property portfolio and opportunistically acquire complimentary intellectual property;

• seek further regulatory advancement for ridinilazole;

• invest in our manufacturing capabilities for ridinilazole and any other products for which we may obtain regulatory approval;

• perform our obligations under our collaboration agreements;

• pursue business development opportunities, including investing in other businesses, products and technologies;

• experience any delays or encounter any issues with any of the above, including but not limited to failed studies, complex results, safety issues or other regulatory challenges

To become and remain profitable, we must succeed in developing and eventually either commercializing or partnering with other organizations to commercialize products that generate significant revenue.

This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our product candidates, discovering additional product candidates, obtaining regulatory approval for these product candidates and manufacturing, marketing, and selling any products for which we may obtain regulatory approval.

We are in the preliminary stages of many of these activities.

We may never succeed in these activities and, even if we do, may never generate revenue that is significant enough to achieve profitability.

Because of the numerous risks and uncertainties associated with pharmaceutical product and biological development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability.

Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.

Our failure to become and remain profitable would depress our value and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or even continue our operations.

Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

Our operations to date have been limited to organizing and staffing our company, developing and securing our technology, raising capital and undertaking preclinical studies and clinical trials of our product candidates.

We have not yet demonstrated our ability to successfully complete development of any product candidates, obtain marketing approvals, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization.

We have not yet demonstrated our ability to successfully complete development of any product candidates, obtain marketing approvals, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities or otherwise obtain a partner to do so as is necessary for successful product commercialization.

Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history.

Assuming we obtain marketing approval for any of our product candidates, we will need to transition from a company with a research and development focus to a company capable of supporting commercial activities or seek an appropriate partner or partners to maximize the commercial opportunity of our products with a deal structure that maximizes our opportunities for profitability.

We may encounter unforeseen expenses, difficulties, complications and delays and may not be successful in such a transition.

We will need substantial additional funding.

If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

We expect our research and development expenses to increase substantially in connection with our ongoing activities, particularly as we initiate and continue clinical trials of ridinilazole for the treatment of CDI, continue our research activities and initiate preclinical programs for other product candidates.

In addition, if we obtain marketing approval for ridinilazole where we retain commercial rights or any other product candidates we develop, we expect to incur significant commercialization expenses related to product sales, marketing, distribution and manufacturing.

We will need substantial additional capital to fund our operations and if we fail to obtain necessary financing, we could be forced to delay, reduce or eliminate the development and commercialization of our product candidates.

We expect our research and development expenses to increase substantially in connection with our ongoing activities, particularly as we seek business development opportunities to clinically develop and ultimately commercialize product candidates.

In addition, if we obtain marketing approval these potential future product candidates where we retain commercial rights or any other product candidates we develop, we expect to incur significant commercialization expenses related to product sales, marketing, distribution and manufacturing.

Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.

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

We believe that the proceeds of $55.0 million received in March 2021 from Mr.

Duggan, our Executive Chairman and Chief Executive Officer and primary stockholder in exchange for the issuance of an unsecured promissory note combined with our existing cash resources, funding agreements and research and development tax credits receivable, will be sufficient to enable us to fund our current operating plans until the second quarter of 2022.

While these capital resources have allowed us to conduct our two Phase 3 clinical trials of ridinilazole, we do not expect to be able to complete all activities associated with these trials without additional capital.

We do not have any committed external source of funds other than amounts we may receive from Eurofarma, BARDA, CARB-X and under our arrangements with them and our research and development tax credits receivable.

As a result, we will need additional capital to fund our operations.

Additional capital, when needed, may not be available to us on acceptable terms, or at all.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders.

Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends or other distributions.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.

If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we will be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Our failure to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on our business, results of operations and financial condition.

We have based the foregoing estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we currently expect.

This estimate assumes, among other things, that we do not obtain any additional funding through grants and clinical trial support or through new collaboration arrangements.

Our future capital requirements will depend on many factors, including:

• the progress, costs and results of clinical trials of ridinilazole for CDI;

• the number and development requirements of other product candidates that we pursue;

• the costs, timing and outcome of regulatory review of ridinilazole and other product candidates we develop;

• the timing and evaluation of the data from our Phase III Ri-CoDIFy clinical trial for our lead product candidate, ridinilazole (formerly SMT19969), the next steps we will take with ridinilazole based upon our review, and the costs associated with these decisions, including completing our review of the data associated with Ri-CoDIFy and any partnerships into which we may enter to continue the advancement of ridinilazole;

• the number and development requirements of other future product candidates that we pursue;

• the costs, timing and outcome of regulatory review of ridinilazole and/or our other product candidates we develop;

• the costs and timing of commercialization activities, including product sales, marketing, distribution and manufacturing, for any of our product candidates that receive marketing approval;

• subject to receipt of marketing approval, revenue received from commercial sales of ridinilazole or any other product candidates;

• subject to receipt of marketing approval, revenue received from commercial sales of any product candidates;

• the costs and timing of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against any intellectual property-related claims;

• our contract with BARDA and whether BARDA elects to pursue its final designated option;

• the amounts we receive from Eurofarma under our license and commercialization agreement, including for the achievement of development, commercialization and sales milestones and for product supply transfers;

• our ability to establish and maintain collaborations, licensing or other arrangements and the financial terms of such arrangements;

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• the extent to which we change our physical presence

• the impact of the novel coronavirus pandemic (COVID-19) and the response to it.

Conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales.

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Accordingly, we will need to continue to rely on additional financing to achieve our business objectives.

In addition, we may

seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans.

In addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans.

Additional financing may not be available to us on acceptable terms, or at all.

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If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Risks Related to our Financial Dependence on Third Parties

Our reliance on government funding for ridinilazole adds uncertainty to our research and commercialization efforts with respect to ridinilazole.

We expect that a significant portion of the funding for the development of ridinilazole will come from our contract with BARDA until such time we may partner with another party in relation to ridinilazole;

although there is no assurance we will be able to enter into such an agreement, or if we do, if all development expenses will be paid by the licensor pursuant to the license agreement.

BARDA is entitled to terminate our BARDA contract for convenience at any time, in whole or in part, and there can be no assurance that our BARDA contract will not be terminated.

Changes in government budgets and research priorities may result in a decreased and de-prioritized emphasis on supporting the development of antibacterial product candidates such as ridinilazole.

If our BARDA contract is terminated or BARDA declines to exercise the final option for the research program, or if there is any reduction or delay in funding under our BARDA contract, we may be forced to seek alternative sources of funding, which may not be available on non-dilutive terms, terms favorable to us, or at all.

If alternative sources of funding are not available, we may suspend or terminate development activities related to ridinilazole.

BARDA may elect not to pursue the remaining designated option beyond the base period.

Even if BARDA does not terminate the contract, the BARDA contract does not require BARDA to provide funding beyond the amount currently obligated under the base period and three options packages of the existing contract (with a performance period ending April 2022).

The awarded contract was originally worth up to $62.0 million.

In June 2019 and again in January 2020, BARDA increased the value of the contract such that it is now worth up to $72.5 million.

In August 2018, one of the three option work segments was exercised by BARDA with the $12.0 million in funding to be drawn down to specifically support drug manufacturing activities required for the submission of marketing approval applications and other regulatory activities.

In June 2019, a second of the three option work segments was exercised by BARDA with the $9.6 million in funding to be drawn down to support patient enrollment and dosing in the Phase III clinical trials of ridinilazole.

Activities to be covered by the remaining option work segment include the preparation, submission and review of applications for marketing approvals of ridinilazole for CDI in the United States.

The remaining federal government funding is dependent on BARDA in its sole discretion exercising the final independent option work segment, upon the achievement by the Company of certain agreed-upon milestones for ridinilazole and there can be no assurance that BARDA will elect to pursue the option.

If this option work

segment is exercised by BARDA, the contract would run into 2022, unless extended by us and BARDA.

Changes in government budgets and research priorities may result in a decreased and de-prioritized emphasis on supporting the development of antibacterial product candidates such as ridinilazole.

In such event, BARDA would have no obligation to exercise its remaining option or extend our existing contract.

Any such decision by BARDA to end its support for our ridinilazole research program could materially adversely affect our business.

Our reliance on government funding for the clinical and regulatory development of ridinilazole may impose requirements that increase the costs of commercialization and production of product candidates developed with the support of these government-funded programs.

Aspects of our development programs are currently being supported, in part, with funding from BARDA.

Contracts and grants awarded by the U.S.

government, its agencies and its partners, including our award from BARDA, include provisions that implement the U.S.

government’s rights and remedies, many of which are not typically found in commercial contracts, including, for example, powers of the government to:

• terminate agreements, in whole or in part, at any time, for any reason or no reason;

• unilaterally modify the parties’ obligations under such contracts, subject to government-determined equitable price adjustments;

• decline to exercise any option for work beyond the initial base period under multi-year contracts;

• suspend contract performance if Congressionally appropriated funding becomes unavailable;

• obtain rights to inventions and technical data made or first produced in the performance of such contracts;

• audit contract-related costs and fees, including allocated indirect costs;

• suspend or debar the contractor from receiving new contracts pending resolution of alleged violations of procurement laws or regulations in the event of wrongdoing by us;

• take actions that result in a longer development timeline than expected;

• direct the course of a development program in a manner not chosen by the government contractor;

• impose U.S.

manufacturing requirements for products that embody or that are produced through the use of inventions conceived or first reduced to practice under such contracts;

• assert qualified march-in rights to grant licenses to third parties to practice contractor-owned inventions that are conceived or first reduced to practice under such contracts;

• pursue criminal or civil remedies under the False Claims Act, False Statements Act and similar remedy provisions specific to government agreements;

• limit the government’s financial liability to amounts appropriated by the U.S.

Congress on a fiscal-year basis, thereby leaving some uncertainty about the future availability of funding for a program even after it has been funded for an initial period.

We may not have the right to prohibit the U.S.

government from using certain inventions and technical data funded by the government and developed by us, and we may not be able to prohibit third-party companies, including our competitors, from using those inventions and technical data in providing products and services to the U.S.

government generally takes the position that it has the right to royalty-free use of inventions and technical data that are developed under U.S.

government contracts.

In addition, U.S.

government contracts normally contain additional requirements that may increase our costs of doing business, reduce our profits, and expose us to liability for failure to comply with these terms and conditions.

These requirements include, for example:

• specialized accounting systems unique to government contracts;

• potential liability for price adjustments or recoupment of government funds after such funds have been spent;

• mandatory disclosure of credible evidence of certain contractual or statutory violations occurring in connection with the contract;

• public disclosures of certain contract information, which may enable competitors to gain insights into our research program;

• mandatory socioeconomic compliance requirements, including labor standards, non-discrimination and affirmative action programs and environmental compliance requirements.

As an organization, we are relatively new to government contracting and the associated regulatory compliance obligations.

If we fail to maintain compliance with those obligations, we may be subject to potential civil and/or criminal liability, termination of our BARDA contract, and/or suspension, debarment, or exclusion from eligibility for other U.S.

government contracts,

funding programs and regulatory approvals.

government contractor, we are subject to financial audits and other reviews by the U.S.

government of our costs and performance under our BARDA contract, as well as our accounting and general business practices related to our BARDA contract.

Based on the results of its audits, the U.S.

government may adjust our contract-related costs and fees, including allocated indirect costs.

We depend on collaborations with third parties for the development and commercialization of some of our product candidates.

If those collaborations are not successful, we may not be able to capitalize on the market potential of these product candidates.

We have entered into a license and commercialization agreement with Eurofarma pursuant to which we granted Eurofarma rights to commercialize ridinilazole in specified countries in South America, Central America and the Caribbean.

We may also enter into additional third-party collaborations for the development and commercialization of ridinilazole in other jurisdictions.

Moreover, we may seek third-party collaborators for development and commercialization of any other product candidates.

Our likely future collaborators for any marketing, distribution, development, licensing or broader collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies and biotechnology companies.

Under our license and commercialization agreement with Eurofarma we have, and under any such arrangements we enter into with any third parties in the future we will likely have, limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product candidates.

Our ability to generate revenues from these arrangements will depend on our collaborators’ abilities and efforts to successfully perform the functions assigned to them in these arrangements.

Our current collaborations pose, and any future collaboration likely will pose, numerous risks to us, including the following:

• collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations and may not perform their obligations as expected;

• collaborators may deemphasize or not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus, including as a result of a sale or disposition of a business unit or development function, or available funding, or external factors such as an acquisition that diverts resources or creates competing priorities;

• collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;

• collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;

• a collaborator with marketing and distribution rights to multiple products may not commit sufficient resources to the marketing and distribution of our product relative to other products;

• collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation;

• collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability;

• disputes may arise between the collaborator and us as to the ownership of intellectual property arising during the collaboration;

• we may grant exclusive rights to our collaborators, which would prevent us from collaborating with others;

• disputes may arise between the collaborators and us that result in the delay or termination of the research, development or commercialization of our products or product candidates or that result in costly litigation or arbitration that diverts management attention and resources;

• collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates.

Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all.

If a collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our product development or commercialization program could be delayed, diminished or terminated.

Use of third parties to manufacture our product candidates may increase the risk that we will not have sufficient quantities of our product candidates or products or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.

We do not own or operate manufacturing facilities for the production of clinical or commercial supplies of our product candidates.

We have limited personnel with experience in drug manufacturing and lack the resources and the capabilities to manufacture any of our product candidates on a clinical or commercial scale.

We currently rely on third parties for supply of the active pharmaceutical ingredients, or API, in our product candidates.

Our strategy is to outsource all manufacturing of our product candidates and products to third parties.

We have agreements with third-party manufacturers for the long-term clinical or commercial supply of our product candidates.

We are engaged with a third-party manufacturer to provide clinical material of the API of ridinilazole with a different supplier responsible for fill and finish services to supply the final drug product for use in the Phase III clinical trials.

The third-party manufacturers may not successfully carry out their contractual duties or obligations, the occurrence of which could substantially increase our costs and limit our supply of such product candidates.

We may be unable to conclude agreements for commercial supply with third-party manufacturers, or may be unable to do so on acceptable terms.

Even if we are able to establish and maintain arrangements with third-party manufacturers, reliance on third-party manufacturers entails additional risks, including:

• reliance on the third party for regulatory compliance and quality assurance;

• the possible breach of the manufacturing agreement by the third party;

• the possible misappropriation of our proprietary information, including our trade secrets and know-how;

• the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.

Third-party manufacturers may not be able to comply with current good manufacturing practice, or cGMP, regulations or similar regulatory requirements outside the United States.

Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates.

Our product candidates and any products that we may develop may compete with other product candidates and products for access to manufacturing facilities.

There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us.

In addition, in order to conduct late-stage clinical trials of our product candidates, we will need to have them manufactured in large quantities.

Our third-party manufacturers may be unable to successfully increase the manufacturing capacity for any of our product candidates in a timely or cost-effective manner, or at all.

Moreover, if our third-party manufacturers are unable to successfully scale up the manufacture of our product candidates in sufficient quality and quantity, the development, testing and clinical trials of that product candidate may be delayed or infeasible, and regulatory approval or commercial launch of that product candidate may be delayed or not obtained, which could significantly harm our business.

If the third parties that we engage to manufacture product for our preclinical tests and clinical trials should cease to continue to do so for any reason, including due to the novel coronavirus or another outbreak, we likely would experience delays in advancing these clinical trials while we identify and qualify replacement suppliers, and we may be unable to obtain replacement supplies on terms that are favorable to us.

In addition, if we are not able to obtain adequate supplies of our product candidates or the drug substances used to manufacture them, it will be more difficult for us to develop our product candidates and compete effectively.

Any inability to obtain adequate supplies of ridinilazole for clinical trials may also impact Eurofarma’s ability to commercialize ridinilazole, if marketing approval is obtained, in the jurisdictions where Eurofarma holds commercialization rights.

Under our license and commercialization agreement with Eurofarma, we have agreed to use commercially reasonable efforts to supply or cause to be supplied to Eurofarma sufficient commercial supply of ridinilazole.

Our current and anticipated future dependence upon others for the manufacture of our product candidates may adversely affect our future profit margins and our ability, and the ability of Eurofarma and any other future collaborator, to develop product candidates and commercialize any products that receive marketing approval on a timely and competitive basis.

We rely on third parties to conduct our clinical trials and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such clinical trials.

We do not independently conduct clinical trials for our product candidates.

We rely on third parties, such as contract research organizations, clinical data management organizations, medical institutions and clinical investigators, to perform this function.

Any of these third parties may terminate their engagements with us at any time.

If we need to enter into alternative arrangements, it would delay our product development activities.

Our reliance on these third parties for clinical development activities reduces our control over these activities but does not relieve us of our responsibilities.

For example, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general investigational plan and protocols for the clinical trial.

Moreover, the FDA requires us to comply with standards, commonly referred to as Good Clinical Practice, or GCP, for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity of data and confidentiality of clinical trial participants are protected.

The EMA imposes similar requirements on us for products that are the subject of clinical trials in the European Union, including the United Kingdom.

We also are required to register ongoing clinical trials and post the results of completed clinical trials on a U.S.

government-sponsored database, www.ClinicalTrials.gov, within certain timeframes.

Failure to comply would violate federal requirements and could result in fines and/or civil and criminal sanctions, which would delay the regulatory approval process and result in adverse publicity.

Furthermore, third parties that we rely on for our clinical development activities may also have relationships with other entities, some of which may be our competitors.

If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with regulatory requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates.

Our product development costs will increase if we experience delays in testing or obtaining marketing approvals.

We also rely on other third parties to store and distribute drug supplies for our clinical trials.

Any performance failure on the part of our distributors could delay clinical development or marketing approval of our product candidates or commercialization of our products, producing additional losses and depriving us of potential product revenue.

If we are not able to establish additional collaborations, we may have to alter our development and commercialization plans.

Our product development programs and the potential commercialization of our product candidates will require substantial additional cash to fund expenses.

For some of our product candidates, we may decide to collaborate further with pharmaceutical and biotechnology companies for the development and potential commercialization of those product candidates.

We face significant competition in seeking appropriate collaborators.

Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of a number of factors.

Those factors may include the design or results of clinical trials, the likelihood of approval by regulatory authorities, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge;

and industry and market conditions generally.

The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate.

We may also be restricted under future license agreements from entering into agreements on certain terms with potential collaborators.

Collaborations are complex and time-consuming to negotiate and document.

In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators and changes to the strategies of the combined company.

We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all.

If we are unable to do so, we may have to curtail the development of a product candidate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense.

If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all.

If we do not have sufficient funds, we may not be able to further develop our product candidates or bring them to market and generate product revenue.

If we fail to comply with our obligations in our funding arrangements with third parties, we could be required to repay the grant funding we have received or grant to these third parties rights under certain of our intellectual property.

We have received grant funding for some of our development programs from philanthropic, non-government and not-for-profit organizations and patient advocacy groups pursuant to agreements that impose development and commercialization diligence obligations on us.

If we fail to comply with these obligations, in certain instances the applicable organization could require us to repay the grant funding we have received with interest or grant to the organization rights under certain of our intellectual property, which could materially adversely affect the value to us of product candidates covered by that intellectual property even if we are entitled to a share of any consideration received by such organization in connection with any subsequent development or commercialization of the product candidates.

Risks Related to Our Industry and Market

We face substantial competition, which may result in others discovering, developing or commercializing products before us or more successfully than we do.

The development and commercialization of new drug products is highly competitive.

We face competition with respect to our current product candidates and any products we may seek to develop or commercialize whether ourselves or through third-party partners, in the future from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide.

Several pharmaceutical and biotechnology companies have established themselves in the market for the treatment of CDI, and several additional companies are developing products for the treatment of CDI.

Currently, the most commonly used treatments for CDI are the broad-spectrum antibiotics vancomycin and metronidazole, both of which are available in generic form in the United States.

Generic antibiotic therapies typically are sold at lower prices than branded antibiotics and generally are preferred by managed care providers of health services.

The antibiotic fidaxomicin (Dificid™ in the United States and Dificlir™ in Europe), which is marketed in the United States by Cubist Pharmaceuticals, Inc., or Cubist, a wholly owned subsidiary of Merck & Co., Inc., or Merck, and in Europe by Tillotts Pharma AG, is approved for treatment of CDI in the United States and the European Union.

Merck received approval from the FDA and EMA for bezlotoxumab (Zinplava™), a monoclonal antibody for the treatment of patients, in combination with an antibiotic, who have a high risk of disease recurrence.

Other approaches in development for the treatment of CDI include vaccines and fecal biotherapy.

For more information, see “Business—Competition” in this Report.

Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and commercialization.

Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are more effective, safer, have fewer or less severe side effects, are approved for broader indications or patient populations, or are more convenient or less expensive than any products that we develop and commercialize.

Our competitors may also obtain marketing approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market.

We believe that many competitors are attempting to develop therapeutics for the target indications of our product candidates, including academic institutions, government agencies, public and private research organizations, large pharmaceutical companies and smaller more focused companies.

Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining approvals from regulatory authorities and marketing approved products than we do.

Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors.

Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to or necessary for our programs.

We may complete a future acquisition that may not achieve intended results or could increase the number of our outstanding shares or amount of outstanding debt or result in a change of control.

We are pursuing business development opportunities to expand our pipeline of product candidates, including without limitation, through potential acquisitions of and/or collaborations with other entities.

Any such transaction could happen at any time, could be material to our business and could take any number of forms, including, for example, an acquisition, merger or a collaboration with other entities.

Any acquisition we consummate will involve the integration of the operations, product candidates and technology of the acquired business with our existing operations and programs, and there are uncertainties inherent in any such integration.

Evaluating potential transactions and integrating completed ones are likely to require significant resources and may divert the attention of our management from ordinary operating matters, including the resources and attention required to further the development of any acquired product candidates or other development programs, or the commercialization of any acquired product.

The success of these potential transactions will depend, in part, on our ability to realize the anticipated growth opportunities and cost synergies through the successful integration of the businesses we acquire with our existing business, as well as the success of the underlying business or intellectual property that we acquire or otherwise obtain rights to.

Unexpected difficulties in the integration process for an acquisition or the failure to retain key management personnel from an acquired business could adversely affect our business, financial results and financial condition.

In addition, in any acquisition, the due diligence process may not identify all factors that could produce unintended or unexpected consequences for us.

Undiscovered factors could cause us to incur potentially material financial liabilities and prevent us from achieving the expected benefits from the acquisition within our desired timeframe, or at all.

Even if we are successful in integrating the acquired businesses, we cannot assure you that these integrations will result in the realization of the full benefit of any anticipated growth opportunities, intellectual property, or cost synergies or that these benefits will be realized within the expected time frames.

In addition, acquired businesses may have unanticipated liabilities or contingencies, or the strategic reasons for the acquisition may not be correct, and the acquisition could not provide the benefits anticipated by management.

If we complete an acquisition, investment or other strategic transaction, we will likely require additional financing that could result in a substantial increase in the number of our outstanding shares or the aggregate amount of our debt.

Risks Related to the COVID-19 Pandemic

The ongoing COVID-19 pandemic continues to evolve and its enduring impact on our business remains uncertain.

Our business has and could continue to be adversely affected, directly or indirectly, by the ongoing COVID-19 pandemic.

The continual spread of COVID-19 and the emergence of new variants has caused a broad impact globally, adversely affecting the economies and financial markets of many countries and resulting in an economic downturn.

These adverse economic effects, as well as the uncertainty regarding the duration, spread and intensity of the pandemic have led to labor shortages, supply restrictions and inflationary pressures.

As a result of the COVID-19 pandemic, governmental authorities across the world have implemented and may continue to implement safety precautions.

These measures may disrupt normal business operations and may continue to have significant negative impacts on businesses and financial markets worldwide.

We continue to monitor our operations and applicable government recommendations, and we have made modifications to our normal operations because of the COVID-19 pandemic, including limiting travel and working from home.

Changes in flexible working arrangements could impact employee retention, employees' productivity and morale, strain our technology resources and introduce operational risks.

Additionally, the risk of cyber-attacks or other privacy or data security incidents may be heightened as a result of our moving increasingly towards a remote working environment, which may be less secure and more susceptible to hacking attacks.

The COVID-19 pandemic could affect the health and availability of our workforce as well as those of the third-parties we rely on.

Furthermore, delays and disruptions due to the COVID-19 pandemic experienced by our collaborators or other third-parties, including regulatory agencies, such as the FDA, could adversely impact the ability of such parties to fulfill their obligations.

The disruptions caused by COVID-19, including the limitations on in-person meetings with existing or potential stakeholders may result in inefficiencies, delays and additional costs in our product development, sales, marketing, product implementation and customer service efforts that we may not be able to fully mitigate through remote work arrangements.

We have experienced, and expect to continue to experience, patient enrollment at a slower pace at certain of our clinical trial sites than expected.

In addition, certain of our clinical trial sites have suspended enrollment due to facility closures, quarantine, travel restrictions and other governmental restrictions.

Further, we are currently unable to undertake certain activities directly including clinical trial site visits and investigator meetings, with such activities being done remotely where possible.

Our ability to continue our existing clinical trials or to initiate new clinical trials has been and may continue to be adversely affected, directly or indirectly, by the COVID-19 pandemic.

While we do not currently anticipate significant interruptions in our clinical supply chain, quarantines, travel restrictions and other measures may significantly impact the ability of employees of our third-party suppliers to get to their places of work to manufacture and deliver additional clinical supplies, which could cause the results from our clinical trials to be delayed even further.

Several vaccines for COVID-19 have been developed and widely distributed in the United States.

However, it is unknown how effective they will be long-term or whether variants of the virus will develop against which the vaccines are less effective.

While it is not possible at this time to estimate the entirety of the continued impact the COVID-19 pandemic will have on our business, operations, employees, customers, suppliers or collaboration partners, continued spread of COVID-19, measures

taken by governments, actions taken to protect employees and the broad impact of the pandemic on all business activities may materially and adversely affect our business, supply chain, results of operations and financial condition.

Risks Related to the Development and Commercialization of our Product Candidates

We depend heavily on the success of our lead product candidate, ridinilazole, which we are developing for the treatment of CDI.

All of our other programs are still in the preclinical or discovery stage.

If we are unable to commercialize ridinilazole, or experience significant delays in doing so, our business will be materially harmed.

We have invested a significant portion of our efforts and financial resources in the development of ridinilazole for CDI, which is still in clinical development.

Our ability to generate product revenues, which may not occur for several years, if ever, will depend heavily on the successful development and commercialization of ridinilazole.

The success of this product candidate will depend on a number of factors, including the following:

• successful completion of clinical development;

• receipt of marketing approvals from applicable regulatory authorities;

• establishing commercial manufacturing arrangements with third-party manufacturers;

• obtaining and maintaining patent and trade secret protection and regulatory exclusivity;

• protecting our rights in our intellectual property portfolio;

• establishing sales, marketing and distribution capabilities;

• launching commercial sales of ridinilazole, if and when approved, whether alone or in collaboration with others;

• acceptance of ridinilazole, if and when approved, by patients, the medical community and third-party payors;

• effectively competing with other therapies;

• maintaining a continued acceptable safety profile of ridinilazole, following approval.

If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully commercialize ridinilazole, which would materially harm our business.

If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of the U.S.

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In particular, due to the small number of patients in our early clinical trials, results from such trials may not be predictive of the outcome of later clinical trials.

The design of a clinical trial can determine whether its results will support approval of a product, and flaws in the design of a clinical trial may not become apparent until

the clinical trial is well advanced or completed.

The design of a clinical trial can determine whether its results will support approval of a product, and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced or completed.

We have limited experience in designing clinical trials and may be unable to design and execute a clinical trial to support marketing approval.

Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.

For example, in June 2018, we announced that our Phase 2 clinical trial of ezutromid, our then-lead utrophin modulator for the treatment of the neuromuscular disease Duchenne muscular dystrophy, or DMD, which we referred to as PhaseOut DMD, failed to meet its primary and secondary endpoints.

PhaseOut DMD was a 48-week open label clinical trial conducted at trial sites in the United States and the United Kingdom.

PhaseOut DMD enrolled a total of 40 ambulatory boys between their fifth and tenth birthday, inclusive, who had a genetically confirmed diagnosis of DMD.

The primary objective of PhaseOut DMD was to investigate changes in magnetic resonance parameters from baseline in leg muscle health.

The secondary objectives of PhaseOut DMD investigated changes in utrophin expression in muscle and muscle fiber regeneration through the examination of muscle fiber biopsies taken from patients at baseline and after 24 weeks or 48 weeks of treatment with ezutromid.

We reported interim 24-week data from PhaseOut DMD in January 2018, with further findings reported in February 2018, and while these data showed positive changes in some of the primary and secondary endpoint measurements after 24 weeks of treatment, we did not see these effects after 48 weeks of treatment.

We announced the discontinuation of the development of ezutromid in June 2018, and we have now completed all the activities related to the close-out of the PhaseOut DMD clinical trial.

Similarly, in September 2020, we discontinued our gonorrhea program based on data from preclinical studies that showed the series of antibiotics we were evaluating did not have suitable qualities for further development.

If we are required to conduct additional clinical trials or other testing of ridinilazole or any other product candidate that we develop beyond those that we contemplate, if we are unable to successfully complete our clinical trials or other testing, if the results of these clinical trials or tests are not positive or are only modestly positive or if there are safety concerns, we may:

• be delayed in obtaining marketing approval for our product candidates;

• not obtain marketing approval at all;

• obtain approval for indications or patient populations that are not as broad as we intended or desired;

• obtain approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings;

• be subject to additional post-marketing testing requirements or restrictions;

• have the product removed from the market after obtaining marketing approval.

We announced topline results for the Phase III Ri-CoDIFy study evaluating ridinilazole which showed that ridinilazole resulted in a numerically higher SCR rate than vancomycin, but did not meet the study’s primary endpoint for superiority.

We are continuing to evaluate the underlying data and perform additional analyses.

There is no assurance as to what will be the outcome of our evaluation and analyses, or whether the regulatory authorities, including the FDA, will agree with our determination and conclusion.

In light of the top-line results of the Ri-CoDIFy study, and our decision to move forward with becoming a leader in the microbiome therapeutics space, we have determined that we may seek one or more third party partnership opportunities for ridinilazole.

We plan to continue to review our data, including performing additional analyses on the microbiome and the relative impacts of ridinilazole and vancomycin with respect to any additional considerations in terms of advancing ridinilazole.

In addition, we may pursue business development opportunities to expand our pipeline of product candidates, including without limitation, through potential acquisitions of and/or collaborations with other entities.

If we experience any number of possible unforeseen events in connection with our clinical trials, potential marketing approval or commercialization of our product candidates could be delayed or prevented.

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• we may have to suspend or terminate clinical trials of our product candidates for various reasons, including a finding that the participants are being exposed to unacceptable health risks;

• regulators, institutional review boards or independent ethics committees may require that we or our investigators materially modify the terms of our clinical research in order to meet additional requirements for receiving marketing approval, including by requiring that we enlarge our trials, broaden the scope of our research, or perform studies in addition to those we currently anticipate, which may delay our ability to obtain marketing approval or impose additional costs;

addition to those we currently anticipate, which may delay our ability to obtain marketing approval or impose additional costs;

• regulators, institutional review boards or independent ethics committees may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks;

• the cost of clinical trials of our product candidates may be greater than we anticipate;

• the supply or quality of our product candidates, comparator drugs or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate, which may occur if, for example, enrollment for our Phase 3 clinical trials were delayed and the clinical supply of ridinilazole or vancomycin manufactured for such trials was not utilized prior to its expiration and needed to be replaced, or if there were disruptions in our supply chain due to weather conditions, natural disasters or contagious diseases or illnesses, such as the novel coronavirus;

• the supply or quality of our product candidates, comparator drugs or other materials necessary to conduct clinical trials of our product candidates in adolescent patients may be insufficient or inadequate, which may occur if, for example, enrollment for our clinical trial programs are delayed and the clinical supply of ridinilazole or vancomycin manufactured for such trials was not utilized prior to its expiration and needed to be replaced, or if there were disruptions in our supply chain due to weather conditions, natural disasters or contagious diseases or illnesses, such as the novel coronavirus;

• our product candidates may have undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators, institutional review boards or independent ethics committees to suspend or terminate the clinical trials.

Due to the novel coronavirus pandemic (COVID-19) and the response to it, we have experienced, and expect to continue to experience, patient enrollment at a slower pace at certain of our clinical trial sites than expected.

As a result, we expect the results from our clinical trials to be delayed and have withdrawn our expectations regarding the timing of completion for the clinical trials.

Our product development costs will increase as we experience delays in testing or marketing approvals.

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exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates and may harm our business and results of operations.

The novel coronavirus pandemic (COVID-19) and the response to it have led to many clinical trial sites slowing or stopping enrollment into our Phase 3 clinical trials, and as a result we expect the results from our clinical trials to be delayed, and we expect these circumstances, and potentially other, related circumstances that are unpredictable at this time, to have a material adverse effect on our business, operations and financial condition.

In December 2019, an outbreak of respiratory illness caused by a novel coronavirus, commonly referred to as COVID-19, began in Wuhan, China and has now spread worldwide.

The World Health Organization has declared the outbreak a pandemic and a global public health emergency.

In addition to those who have been directly affected, millions more have been affected by government efforts in the United States, the United Kingdom, the European Union and around the world to slow the spread of the pandemic through quarantines, travel restrictions, heightened border scrutiny and other measures.

The pandemic and measures taken in response by governments, private industry, individuals and others have also had significant direct and indirect adverse impacts on businesses and commerce as supply chains have been disrupted;

facilities and production have been suspended;

and demand for certain goods and services has spiked, while demand for other goods and services has decreased significantly.

The future progression of the pandemic and its effects on our business and operations are highly uncertain.

We have experienced, and expect to continue to experience, patient enrollment at a slower pace at certain of our clinical trial sites than expected.

In addition, certain of our clinical trial sites have suspended enrollment due to facility closures, quarantine, travel restrictions and other governmental restrictions.

Further we are currently unable to undertake certain activities directly including clinical trial site visits and investigator meetings, with such activities being done remotely where possible.

As a result, we expect the results from our clinical trials to be delayed, which we expect will have a material adverse impact on our clinical trial plans and timelines.

Additionally, as a result of the slower pace of enrollment, our clinical supplies of ridinilazole and vancomycin manufactured for such trials may not be utilized prior to their expiration and may need to be replaced.

For more information regarding the risks related to our clinical trials, see “If we experience any of a number of possible unforeseen events in connection with our clinical trials, potential marketing approval or commercialization of our product candidates could be delayed or prevented.”

The coronavirus pandemic continues to evolve.

There may be other material adverse impacts on our business, operations and financial condition that are unpredictable at this time, including delays in the development and regulatory approval of other product candidates and difficulties in retaining qualified personnel during the pandemic and once it subsides.

The extent to which the pandemic may impact our business will depend on future developments, such as the duration of the pandemic, quarantines, travel restrictions and other measures in the United States, the United Kingdom, the European Union and around the world, business closures or business disruptions, the effectiveness of vaccination efforts and other actions taken to contain the pandemic.

If we experience delays or difficulties in the enrollment of patients in our clinical trials, our receipt of necessary marketing approvals could be delayed or prevented.

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CDI is an acute infection that requires rapid diagnosis.

For our Phase 3 clinical trials of ridinilazole, we need to identify potential patients, test them for CDI and enroll them within three days and prior to patients receiving other antibiotic treatments that may be active against CDI for greater than a 24-hour period.

For our Phase III clinical trials of ridinilazole, we need to identify potential patients, test them for CDI and enroll them within three days and prior to patients receiving other antibiotic treatments that may be active against CDI for greater than a 24-hour period.

In addition, our competitors in CDI have ongoing clinical trials for product candidates that could be competitive with our product candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates or choose not to enroll in any clinical trials for various reasons, including due to fears of contagious diseases or illnesses, such as the novel coronavirus.

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• proximity and availability of clinical trial sites for prospective patients.

As a result, we expect the results from our clinical trials to be delayed and have withdrawn our expectations regarding the timing of completion for the clinical trials.

Enrollment delays in our clinical trials may result in increased development costs for our product candidates, which would cause the value of our company to decline and limit our ability to obtain additional financing.

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Although ridinilazole has generally been well tolerated at all doses tested, patients who typically are diagnosed with CDI have a number of underlying illnesses, which means it is more likely that we will see adverse events and serious adverse events being reported even if these events are later deemed to be unrelated to treatment with ridinilazole.

For example, in our Phase 2 proof of concept clinical trial of ridinilazole, a total of 180 adverse events were reported for ridinilazole, although the majority of these were considered unlikely to be related to treatment with ridinilazole, and the number of ridinilazole reported adverse events was similar to patients treated with vancomycin, the comparator drug used in this clinical trial, where a total of 183 adverse events were reported.

For example, in our Phase II proof of concept clinical trial of ridinilazole, a total of 180 adverse events were reported for ridinilazole, although the majority of these were considered unlikely to be related to treatment with ridinilazole, and the number of ridinilazole reported adverse events was similar to patients treated with vancomycin, the comparator drug used in this clinical trial, where a total of 183 adverse events were reported.

Most of the adverse events occurred in the gastrointestinal system organ class with nausea, abdominal pain, abdominal distention and vomiting the most commonly reported events for both treatment groups.

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If ridinilazole or any of our other product candidates receive marketing approval, such products may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community.

If these products do not achieve an adequate level of acceptance, we may not generate significant product revenues or revenue from collaboration agreements, including our license and commercialization agreement with Eurofarma, or any income from operations.

If these products do not achieve an adequate level of acceptance, it could make it more difficult to enter into third-party partnership arrangements, and we may not generate significant product revenues or revenue from collaboration agreements, including our license and commercialization agreement with Eurofarma, or any income from operations.

The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:

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• any restrictions on concomitant use of other medications.

Our ability to negotiate, secure and maintain third-party coverage and reimbursement may be affected by political, economic and regulatory developments in the United States, the European Union and other jurisdictions.

The ability to negotiate, secure and maintain third-party coverage and reimbursement may be affected by political, economic and regulatory developments in the United States, the European Union and other jurisdictions.

Governments continue to impose cost containment measures, and third-party payors are increasingly challenging prices charged for medicines and examining their cost effectiveness, in addition to their safety and efficacy.

These and other similar developments could significantly limit the degree of market acceptance of ridinilazole or any of our other product candidates that receive marketing approval.

If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may not be successful in commercializing ridinilazole or any other product candidate if and when such product candidates are approved.

We do not have a sales or marketing infrastructure and have no experience as a company in the sale or marketing of pharmaceutical products.

If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may not be successful in commercializing a product candidate if and when such product candidates are approved.

We do not have a sales or marketing infrastructure and have no experience as a company in the sale or marketing of pharmaceutical products, although certain employees do have experience in the sale and marketing of pharmaceutical products.

To achieve commercial success for any approved product, we must either develop a sales and marketing organization or outsource these functions to third parties.

If ridinilazole receives marketing approval, we intend to commercialize it in the United States with our own specialized sales force.

We will rely on Eurofarma to commercialize ridinilazole in Argentina, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Suriname, Dominican Republic, Uruguay and Venezuela, pursuant to the license and commercialization agreement we entered into with Eurofarma in December 2017.

We are also currently exploring options to develop and commercialize this antibiotic candidate in other territories.

If ridinilazole receives marketing approval, we intend to seek commercialization partners in the United States and around the world.

We will rely on Eurofarma to commercialize ridinilazole in Argentina,

Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Suriname, Dominican Republic, Uruguay and Venezuela, pursuant to the license and commercialization agreement we entered into with Eurofarma in December 2017.

There are risks involved with establishing our own sales and marketing capabilities and entering into arrangements with third parties to perform these services.

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In addition, we may not be successful in entering into arrangements with third parties to sell and market our product candidates or may be unable to do so on terms that are acceptable to us.

We likely will have little control over such

third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively.

We likely will have little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our products effectively.

If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be successful in commercializing our product candidates.

We face substantial competition, which may result in others discovering, developing or commercializing products before us or more successfully than we do.

The development and commercialization of new drug products is highly competitive.

We face competition with respect to our current product candidates and any products we may seek to develop or commercialize in the future from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide.

Currently, the most commonly used treatments for CDI are the broad-spectrum antibiotics vancomycin and metronidazole, both of which are available in generic form in the United States.

Generic antibiotic therapies typically are sold at lower prices than branded antibiotics and generally are preferred by managed care providers of health services.

Other approaches in development for the treatment of CDI include vaccines and fecal biotherapy.

For more information, see “Business—Competition” in this Report.

Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors.

Smaller and other early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

Legal, Tax, Regulatory and Compliance Risks

Even if we are able to commercialize ridinilazole or any other product candidate that we develop, the product may become subject to unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives, which would harm our business.

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

Our ability to commercialize ridinilazole or any other product candidate successfully also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government health

administration authorities, private health insurers and other organizations.

Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels.

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In addition, third-party payors are likely to impose strict requirements for reimbursement of a higher priced drug.

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

If reimbursement is not

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

There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the purposes for which the drug is approved by the applicable regulatory authority.

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

We have separate product liability insurance policies that cover our product candidates and each of our clinical trials.

These policies each provide coverage of up to $26.4 million in the aggregate for clinical trials, or portions thereof, conducted worldwide.

The insurance policies covering our clinical trials are subject to a per claim deductible.

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Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities.

We also maintain liability insurance for some of these risks, but our policy has a coverage limit of $13.2 million per occurrence.

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

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Our spending on current and future research and development programs and product candidates may not yield any commercially viable products.

For example, in June 2018, we announced that our PhaseOut DMD clinical trial of ezutromid for DMD failed to meet its primary and secondary endpoints.

We had reported interim 24-week data from PhaseOut DMD in January 2018, with further findings reported in February 2018, and while these showed positive changes in some of the primary and secondary endpoint measurements after 24 weeks of treatment, we did not see these effects after 48 weeks of treatment.

We announced the discontinuation of the development of ezutromid in June 2018 and have also discontinued the development of our future generation utrophin modulators, despite our significant investment of resources into the development of our utrophin modulators for the treatment of DMD over a number of years.

In addition, in September 2020, following the review of data from preclinical studies, we determined to cease work on our gonorrhea program.

For example, in September 2020, following the review of data from preclinical studies, we determined to cease work on our gonorrhoeae program.

We have based our research and development efforts for CDI on the antibiotic ridinilazole.

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

The anticipated benefits of any acquisition that we consummate may not be fully realized, may take longer to realize than expected or may not be realized at all.

In addition, any acquisitions are likely to require significant resources and management attention, including the resources and attention required to further the development of any acquired product candidates or other development programs, or the commercialization of any acquired product, and we may not realize the anticipated benefits from such an acquisition within the time period we expect, or at all.

In addition, in any acquisition, the due diligence process may not identify all factors that could produce unintended or unexpected consequences for us.

In December 2017, we obtained a bacterial genetics-based platform, which we refer to as our Discuva Platform, for the discovery and development of new mechanism antibiotic compounds through our acquisition of Discuva Limited, or Discuva.

While we expect to use the Discuva Platform to facilitate our discovery and development of new mechanism antibiotics, we may fail to do so.

As a result, we may not obtain any value from our acquisition of Discuva.

The United Kingdom’s withdrawal from the European Union could lead to increased market volatility and make it more difficult for us to do business in Europe, which could adversely impact the market price of our common stock.

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

Following protracted negotiations, the United Kingdom withdrew from the European Union on January 31, 2020.

Pursuant to the formal withdrawal arrangements agreed between the United Kingdom and the European Union, European Union rules have ceased to apply following the transition period which ended December 31, 2020.

However, in December 2020, the United Kingdom and the European Union agreed on a trade and cooperation agreement that will apply provisionally after the end of the transition period until it is ratified by the parties to the agreement.

The United Kingdom has passed legislation giving effect to the trade and cooperation agreement, with the E.U.

expected to formally adopt the agreement in early 2021.

The trade and cooperation agreement provides a general framework for the post-withdrawal relationship between the United Kingdom and the European Union.

However there remains substantial uncertainty related to the implementation of the trade and cooperation agreement and the application of its terms.

As a result of the United Kingdom’s withdrawal from the European Union, we may also face new regulatory costs and challenges that could have a material adverse effect on our operations.

Lack of clarity about future U.K.

laws and regulations as the United Kingdom determines which E.U.-derived laws and regulations to replace or replicate as part of a withdrawal, 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 further increase costs and depress economic activity.

In addition, currency exchange rates in the pound sterling and the euro with respect to each other and the U.S.

dollar have been and may continue to be adversely affected by the future trade relationship negotiations and their outcome.

In the near term, there is a risk of disrupted import and export processes due to a lack of administrative processing capacity by the respective U.K.

customs agencies that may delay time-sensitive shipments and may negatively impact our clinical trial supply chain, which includes locations in both the United Kingdom and the European Union.

The long-term effects of the United Kingdom’s withdrawal from the European Union are not yet known and this uncertainty creates challenges and risks which make it more difficult for us to do business in Europe, which could adversely impact the market price of our common stock.

The United Kingdom formally withdrew from the European Union on January 1, 2020, commonly referred to as “Brexit.” As a result, the United Kingdom is no longer part of the European Single Market and European Union Customs Union effective January 1, 2021.

The future effects of Brexit are uncertain and will depend on the implementation of the Trade and Cooperation Agreement between the United Kingdom and the European Union ("TCA") and any other future agreements the United Kingdom may make to retain access to European Union markets.

Under the TCA, which became effective on May 1, 2021, there is no longer free movement of goods or people between the United Kingdom and the European Union, which has resulted and could continue to result in certain delays in the shipment of goods from the United Kingdom to the European Union.

Brexit could also lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which European Union laws to replace or replicate.

The long-term risks of Brexit include economic recessions in the United Kingdom or other European markets and currency instability for both the British pound sterling and the euro.

In the near term, there is a risk of disrupted import and export processes due to a lack of administrative processing capacity by the respective United Kingdom and European Union customs agencies that may delay time-sensitive shipments and may negatively impact our clinical trial supply chain, which includes locations in both the United Kingdom and the European Union.

Recent and potential future changes to U.S.

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We are unable to predict what tax changes may be enacted in the future or what effect such changes would have on our business, but such changes could affect our effective tax rates in countries where we have operations and could have an adverse effect on our overall tax position in the future, along with increasing the complexity, burden and cost of tax compliance.

Our computer systems, or those of any collaborators or contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs.

Despite the implementation of security measures, our computer systems and those of third parties with whom we contract are vulnerable to damage from cyber-attacks, computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.

Any system failure, accident or security breach that causes interruptions in our operations could result in a material disruption of our product development programs and business operations, in addition to possibly requiring substantial expenditures of resources to remedy.

For example, the loss of clinical trial data from completed clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.

To the extent that any disruption or security breach results in a loss or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we may incur liabilities and the further development of our product candidates may be delayed.

In addition, we may not have adequate insurance coverage to provide compensation for any losses associated with such events.

While we have not experienced any material losses relating to cyber-attacks, we have been the subject of cyber-attacks.

We could be subject to risks caused by misappropriation, misuse, leakage, falsification or intentional or accidental release or loss of information maintained in the information systems and networks of our company, including personal information of our employees.

In addition, outside parties may attempt to penetrate our systems or those of our vendors or fraudulently induce our employees or employees of our vendors to disclose sensitive information in order to gain access to our data.

Like other companies, we may experience threats to our data and systems, including malicious codes and viruses, and other cyber-attacks.

The number and complexity of these threats continue to increase over time.

If a material breach of our security or that of our vendors occurs, the market perception of the effectiveness of our security measures could be harmed, we could lose business and our reputation and credibility could be damaged.

We could be required to expend significant amounts of money and other resources to repair or replace information systems or networks.

Although we develop and maintain systems and controls designed to prevent these events from occurring, and we have a process to identify and mitigate threats, the development and maintenance of these systems, controls and processes is costly and requires ongoing monitoring and updating as technologies change and efforts to overcome security measures become more sophisticated.

Moreover, despite our efforts, the possibility of these events occurring cannot be eliminated entirely.

We are increasingly dependent upon technology systems and data to operate our business.

In particular, the COVID-19 pandemic has caused us to modify our business practices, including the requirement that our office-based employees work from home.

As a result, we are increasingly dependent upon our technology systems to operate our business and our ability to effectively manage our business depends on the security, reliability and adequacy of our technology systems and data.

Compliance with global privacy and data security requirements could result in additional costs and liabilities to us or inhibit our ability to collect and process data globally, and the failure to comply with such requirements could have a material adverse effect on our business, financial condition or results of operations.

The regulatory framework for the collection, use, safeguarding, sharing, transfer and other processing of information worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future.

Globally, virtually every jurisdiction in which we operate has established its own data security and privacy frameworks with which we must comply.

For example, the European Union’s General Data Protection Regulation 2016/679, or GDPR, and as enacted in the U.K.

through the Data Protection Act 2018, imposes strict obligations on the processing of personal data, including personal health data, and the free movement of such data.

The GDPR applies to any company established in the European Union as well as any company outside the European Union that processes personal data in connection with the offering of goods or services to individuals in the European Union or the monitoring of their behavior.

The GDPR enhances data protection obligations for processors and controllers of personal data, including, for example, obligations relating to:

processing health and other sensitive data;

obtaining consent of individuals;

providing notice to individuals regarding data processing activities;

responding to data subject requests;

taking certain measures when engaging third-party processors;

notifying data subjects and regulators of data breaches;

implementing safeguards to protect the security and confidentiality of personal data;

and transferring personal data to countries outside the European Union, including the United States.

The GDPR imposes additional obligations and risks upon our business and substantially increases the penalties to which we could be subject in the event of any non-compliance, including fines of up to €20 million or 4% of total worldwide annual turnover, whichever is higher.

The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies and obtain compensation for damages.

Given the breadth and depth of changes in data protection obligations, preparing for and complying with the GDPR’s requirements has required and will continue to require significant time, resources and a review of our technologies, systems and practices, as well as those of any third-party collaborators, service providers, contractors or consultants that process or transfer personal data collected in the European Union.

The GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as healthcare data or other personal information from our clinical trials, could require us to change our business practices or lead to government enforcement actions, private litigation or significant fines and penalties against us, reputational harm and could have a material adverse effect on our business, financial condition or results of operations.

Risks Related to our Dependence on Third Parties

Our reliance on government funding for ridinilazole adds uncertainty to our research and commercialization efforts with respect to ridinilazole.

We expect that a significant portion of the funding for the development of ridinilazole will come from our contract with BARDA.

BARDA is entitled to terminate our BARDA contract for convenience at any time, in whole or in part, and there can be no assurance that our BARDA contract will not be terminated.

Changes in government budgets and research priorities may result in a decreased and de-prioritized emphasis on supporting the development of antibacterial product candidates such as ridinilazole.

If alternative sources of funding are not available, we may suspend or terminate development activities related to ridinilazole.

BARDA could decide to delay certain of our activities, and we may elect to move forward with certain activities at our own risk and without BARDA reimbursement.

Under our BARDA contract, BARDA will regularly review our ridinilazole development efforts and clinical activities.

Under certain circumstances, BARDA may direct us to delay certain activities and invest additional time and resources before proceeding.

If we follow such BARDA direction, we may incur delays and additional costs for which we had not planned.

In addition, even if BARDA does not direct us to delay certain activities, BARDA’s review of our progress may take longer than we expect, which may result in overall program delays.

Also, the costs associated with following BARDA’s direction to delay certain activities may or may not be reimbursed by BARDA under our contract.

Finally, if we decide not to follow the direction provided by BARDA and instead pursue activities that we believe are in the best interest of the development of ridinilazole, we might forgo reimbursement under our BARDA contract, and BARDA could assert that we are in default of our contractual commitments, potentially leading to the termination of our contract, and possibly suspension, debarment, or exclusion from eligibility for other U.S.

government contracts, funding programs and regulatory approvals.

BARDA may elect not to pursue the remaining designated option beyond the base period.

Our BARDA contract initially included a base period providing for reimbursement of up to $32 million and three options that, if exercised in full by

BARDA, would extend the contract until the year 2022 and increase the total potential reimbursement to $62 million.

In August 2018, BARDA exercised the first of these three options with the $12 million in funding to be drawn down to specifically support drug manufacturing activities required for the submission of marketing approval applications and other regulatory activities related to ridinilazole.

In June 2019, BARDA increased the total value of the funding contract to up to $63.7 million;

at this time, BARDA also exercised a second option work segment worth $9.6 million.

In January 2020, BARDA expanded the award by a further $8.8 million through a new option package to support a new clinical trial in adolescent patients.

This increased the total value of the funding contract to up to $72.5 million and brought the total amount of committed BARDA funding to $62.4 million.

However, BARDA will decide at its sole discretion whether to pursue the remaining option under the contract, and there can be no assurance that BARDA will elect to pursue the option.