Summit Therapeutics Inc. 10-K

Item 1. Business Overview We are a biopharmaceutical company focused on the discovery, development, and commercialization of patient-, physician-, caregiver- and societal-friendly medicinal therapies intended to improve quality of life, increase life expectancy, and resolve serious unmet needs. Our novel mechanism pipeline of product candidates is designed with the goal to become the patient-friendly, new-era standard-of-care medicines, and to work in harmony with the human microbiome. Summit’s lead product candidate, ridinilazole, is a novel first-in-class drug that is engaged in a global Phase III clinical trial program. On December 20, 2021, we announced topline results for the Phase III Ri-CoDIFy study evaluating ridinilazole for treating patients suffering from Clostridioides difficile infection, also known as C. difficile infection, or CDI. Our second product candidate, SMT-738, was announced in May 2021 for combating multidrug resistant infections, specifically Carbapenem-resistant Enterobacteriaceae (“CRE”) infections. SMT-738 is the first of a novel class of precision antibiotics that has entered into preclinical development. We intend to expand our portfolio by developing further new mechanism, new era product offerings that are designed to work in harmony with the human gut microbiome in the therapeutic areas of oncology and infectious diseases. Throughout the process of our clinical development of ridinilazole, we have learned a substantial amount regarding the importance of the microbiome as we have sought to reduce C. difficile infection recurrence to the lowest practical levels. Importantly, as we have continued to intensify our focus on the microbiome, we believe that the focus on the health of the microbiome will become one of the most important developments in human health over the next decade. As a result, we intend to implement a strategy that primarily centers on microbiome-focused therapeutics that could benefit treatments in the areas of oncology and anti-infectives. We will enact this focus through business development activities, including possible acquisitions of and/or collaborations with existing entities. For ridinilazole, we are in the process of evaluating the future path forward, including potential partnership opportunities. Ridinilazole for Clostridioides difficile Infection Our lead CDI product candidate is ridinilazole (formerly SMT19969), an orally administered, novel mechanism, small molecule antibiotic. The first patient in our Phase III clinical program was dosed ridinilazole in February 2019. The Phase III clinical program consists of two Phase III pivotal clinical trials (“Ri-CoDIFy 1” and “Ri-CoDIFy 2”) which were combined into a single study (“Ri-CoDIFy”). The Phase III clinical program also consists of a pediatrics study (“Ri-CoDIFy 3”). The Phase III Ri-CoDIFy pivotal trial was designed to assess, as the primary endpoint, the superiority of ridinilazole compared to vancomycin in Sustained Clinical Response (“SCR”), which was defined as Clinical Response of the treated episode of CDI and no recurrence of CDI through 30 days after the end of treatment. Additional endpoints included Clinical Response ("CR"), recurrence rate, safety and tolerability, analyses of the gut microbiome and metabolome, in addition to quality of life and health economic outcome measures. The top-line results of the Ri-CoDIFy study showed that ridinilazole resulted in a numerically higher SCR rate than vancomycin but did not meet the study’s primary endpoint threshold for superiority. Patients treated with ridinilazole, a precision antibiotic, experienced substantially less recurrence of C. difficile infection as compared to patients administered vancomycin (nominal p-value = 0.0002). It further showed that ridinilazole was well tolerated, and the overall safety profile remained unchanged. We are in the process of evaluating the future path forward with respect to ridinilazole, including potential partnership opportunities. Ridinilazole is designed to selectively target the bacterium Clostridioides difficile (previously known as Clostridium difficile ) or C. difficile while preserving the commensal microbes of the gut microbiome, thus allowing more rapid restoration of the microbiome to a healthy state. A healthy, diverse microbiome is associated with decreased CDI recurrence rates. CDI is a bacterial infection of the colon caused by the bacterium C. difficile which produces toxins that cause inflammation of the colon resulting in severe watery diarrhea, painful abdominal cramping, nausea, fever, and dehydration. CDI can also result in more serious disease complications, including bowel perforation, sepsis, and death. CDI typically develops following the use of antibiotics that can cause widespread damage to the microbiome, or the natural gut flora, and allow overgrowth of C. difficile bacteria. CDI represents a serious healthcare issue in hospitals, long-term care homes, and in the wider community. CDI is the most common healthcare-associated infection. Ridinilazole’s Phase III clinical program has been funded in part with federal funds from the Biomedical Advanced Research and Development Authority (“BARDA”), part of the Office of the Assistant Secretary for Preparedness and Response at the U.S. Department of Health and Human Services. 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. The 1 remaining federal government funding is dependent on BARDA at its sole discretion exercising the final independent option work segment, under our achievement of certain agreed-upon milestones for ridinilazole. As of December 31, 2021, an aggregate of $56.5 million of the total committed BARDA funding has been received. We have also entered into a license and commercialization agreement with Eurofarma Laboratórios S.A., or Eurofarma, pursuant to which we granted Eurofarma exclusive rights to commercialize ridinilazole in specified countries in South America, Central America and the Caribbean. We have retained commercial rights to ridinilazole for the treatment of CDI across Rest of World territories. Other Pipeline Product Candidates Discuva Platform In December 2017, we expanded our activities in the field of infectious diseases with the acquisition of Discuva Limited, a privately held United Kingdom-based company. Through this acquisition, we obtained a bacterial genetics platform and a suite of software-based technologies (collectively termed our “Discuva Platform”), which facilitate the discovery and development of new mechanism antibiotics. Our Discuva Platform can be used to identify new bacterial targets for drug discovery, understand the mechanism of action of small molecules targeting varying types of bacteria and select the most optimal preclinical candidates, including those with the least propensity to develop bacterial resistance. In addition to discovery project support, our deep biology and microbiology expertise has been utilized over the past year to provide further insights into the mechanism of action of ridinilazole and to characterize the preclinical microbiology of ridinilazole in greater detail. The mechanism of action and microbiology studies may be an important component of any regulatory filings and communications with regulatory agencies for ridinilazole. Enterobacteriaceae Program We continue to advance our highly innovative program targeting infections caused by Enterobacteriaceae. We have used our Discuva Platform to identify our DDS-04 series, a novel chemotype active against a clinically unexploited bacterial target that has the potential to treat Enterobacteriaceae infections. Enterobacteriaceae are a family of bacteria responsible for serious infections across a number of conditions including bloodstream infections, urinary tract infections (“UTI”) and hospital-acquired pneumonias. Multi-drug resistant (“MDR”) Enterobacteriaceae are resistant to treatment by most or occasionally all existing antibiotics. The most difficult to treat among them are the Extended Spectrum Beta-Lactamase (“ESBL”)-producing and the Carbapenem-resistant Enterobacteriaceae (“CRE”). According to the Center for Disease Control and Prevention (“CDC”), ESBL-producing and CRE Enterobacteriaceae have collectively caused an estimated 197,400 infections and 9,100 deaths in hospitalized patients in the United States in 2019. Our DDS-04 series continues to build on highly promising preclinical in vivo efficacy data with an immediate focus on a new antibiotic agent for the treatment of complicated urinary tract infections, pneumonia and the associated bacteremia. Our lead preclinical candidate for the Enterobacteriaceae program from the DDS-04 series is SMT026738 (formerly “DIS-0104145” and referred to as “SMT-738”). SMT-738 is a novel small molecule inhibitor of the essential bacterial lipoprotein transport system (LolCDE) in Gram-negative bacteria, which displays a narrow spectrum of activity towards Enterobacteriaceae. SMT-738 has demonstrated potent in vitro activity against global MDR isolates of E. coli and K. pneumoniae, including the clinically challenging NDM-carrying CRE isolates where many currently available treatment options have succumbed to clinical resistance including colistin, an antibiotic of last resort. Most importantly, SMT-738 has also shown robust in vivo efficacy in relevant murine models of UTI, pneumonia and sepsis. A preliminary rodent toxicity study has been concluded and the data supports the continued clinical development of SMT-738. SMT-738 has the potential to become a first in class antibiotic to treat life-threatening infections. Summit has received a sub-award from CARB-X to progress SMT-738 through preclinical development and an option to continue into Phase Ia clinical studies. The award commits initial non-dilutive funding of up to $4.1 million for the preclinical phase, with the potential for a further $3.7 million available for the continued clinical development upon successfully achieving key preclinical development milestones. We have been and plan to continue to perform IND-enabling activities. 2 Our Product Development Pipeline The following table summarizes our product development pipeline. (1) We have granted Eurofarma (see further discussion below of funding arrangement) an exclusive license to the commercial rights for ridinilazole in specified countries in South America, Central America and the Caribbean. We retain commercialization rights across Rest of World territories. (2) Currently supported by funding from CARB-X (see further discussion below of funding arrangement). Our Strategy Our goal is to become a fully integrated biopharmaceutical company focused on the discovery, development, and, commercialization of patient-, provider-, novel mechanism of action and/or new era products that work in harmony with the human gut microbiome, including innovative therapeutics for the treatment of certain cancers and infectious diseases. We have announced our intention to continue to expand our pipeline with therapeutics that work in conjunction with the human gut microbiome for the treatment of certain cancers and infectious diseases through business development activities including, but not limited to, partnerships with, collaborations with, and/or acquisitions of existing entities. The key elements of our strategy to achieve this goal are to: Evaluating the future path forward for our existing pipeline product candidates, including potential partnership opportunities, as applicable. For ridinilazole, we are in the process of evaluating the future path forward, including potential partnership opportunities. Expand our product portfolio of patient-friendly, new-era standards-of-care through our Summit Therapeutics Innovation Engine, including expanding our pipeline to potentially include patient-friendly oncology treatments. We intend to expand our product portfolio through the identification of new-era standards-of-care therapies that work in harmony with the human gut microbiome. Our therapeutic areas of focus, incorporating the gut microbiome, include oncology and anti-infectives. We intend to expand our pipeline through our Summit Therapeutics Innovation Engine which is our research and discovery capabilities. In addition, business development activities are planned to potentially further expand our pipeline through strategic collaborations with, or acquisitions of, target opportunities that elucidate our mission. Clostridioides difficile Infection Overview Clostridioides difficile infection (“ C. difficile infection” or "CDI") is a bacterial infection of the colon caused by the bacterium C. difficile which produces toxins that cause inflammation of the colon resulting in severe watery diarrhea, painful abdominal cramping, nausea, fever and dehydration. CDI can also result in more serious disease complications, including bowel perforation, sepsis and death. CDI represents a serious healthcare issue in hospitals as the most common hospital-acquired infection, in long-term care homes and in the wider community. We estimate that there are approximately half a million cases of CDI each year across the United States based on a meta-analysis published in the Journal of Global Health in June 2019. CDI originates from a bacterium known as Clostridioides difficile, Clostridium difficile or C. difficile . C. difficile sometimes can be a harmless resident of the gastrointestinal tract. The complex community of microorganisms that make up the gut microbiome usually moderates levels of C. difficile . The gut microbiome, which includes natural gut flora, is an essential part of the normal function of the gastrointestinal tract and also has wide implications in human health, such as the proper function of the immune system. CDI typically develops following the use of broad-spectrum antibiotic agents that can cause widespread damage to the gut microbiome and allow overgrowth of C. difficile . Hypervirulent C. difficile strains have also emerged and are frequently associated with more severe diseases. A paper published in 2018 in the peer-reviewed journal, American Journal of Infection Control , reported that in the United States, the hypervirulent strain, ribotype 027, accounts for approximately one-fifth of all CDI cases. 3 The primary clinical issue with CDI is disease recurrence. This is in contrast to other bacterial threats for which drug resistance is the principal concern. According to an article published in 2012 in the peer reviewed journal Clinical Microbiology and Infection , up to 25% of patients with CDI suffer a second episode of the infection. The risk of further recurrence rises to 65% after a patient suffers a third episode of CDI. In addition, each episode of recurrent disease is associated with greater disease severity and higher mortality rates. Recurrent disease is associated with an increased burden on the healthcare system. In 2013, the CDC highlighted CDI as one of three pathogens that pose an immediate public health threat and require urgent and aggressive action. In 2019, the CDC published an updated report that continued to highlight the threat posed by CDI, with this infection classified as one of four bacterial pathogens that poses an immediate public health threat and requires urgent and aggressive action. In 2012, the Generating Antibiotics Incentives Now Act provisions of the FDA Safety and Innovation Act, or GAIN, became law. The goal of GAIN is to encourage the development of new antibiotics that treat specific pathogens, including C. difficile , which cause serious and life-threatening infections. Current CDI Treatments Existing treatment options for CDI are limited. Currently, the most commonly used treatments for CDI is vancomycin, which is a broad-spectrum antibiotic. A broad-spectrum antibiotic may not be the most appropriate treatment for CDI because although the antibiotics reduce levels of C. difficile , they cause significant collateral damage to the gut microbiome by killing bacteria that contribute to a healthy microbiome. This collateral damage to the gut microbiome leaves patients vulnerable to recurrent CDI. According to the Infectious Disease Society of America (“IDSA”) guidelines, the current standard-of-care for primary CDI is to treat with antibiotics, such as fidaxomicin or vancomycin. Both are recommended to treat primary CDI, and they do not have a label claim to reduce or prevent CDI recurrence. No antibiotic therapeutics are currently approved for the treatment of recurrent CDI. In October 2016, the FDA approved bezlotoxumab, a monoclonal antibody, in conjunction with an antibiotic to reduce the recurrence of CDI in patients who have a high risk of recurrence. For patients with a recurrent CDI episode within the last 6 months, IDSA suggests using bezlotoxumab as a co-intervention along with standard-of-care (SOC) antibiotics rather than SOC antibiotics alone (conditional recommendation, very low certainty of evidence). Bezlotoxumab binds to toxin B, one of the toxins produced by the C. difficile bacteria, to neutralize its effects. Bezlotoxumab does not treat CDI and has no direct antimicrobial activity. Ridinilazole for the Treatment of CDI We have been developing ridinilazole as an orally-administered, small molecule targeted antibiotic for the treatment of CDI. Ridinilazole is designed to selectively target C. difficile bacteria while preserving the microbiome and thereby treat the initial infection and reduce CDI recurrence rates. Ridinilazole is aligned with good antibiotic stewardship through its targeted spectrum of activity and the potential to reduce disease recurrence. Ridinilazole comprises of a symmetrical bis-benzimidazole scaffold which forms its core structure. We believe, based on preclinical studies conducted to date, that ridinilazole is part of a novel structural class of antibiotics that is distinct from the major classes of marketed antibiotics. We conducted a Phase III clinical study that evaluated the benefits of ridinilazole compared to the current standard-of-care antibiotic, vancomycin, in patients with CDI. The Phase III Ri-CoDIFy trial had the primary endpoint that was testing for superiority in SCR, which is defined as Clinical Response and no recurrence of CDI within 30 days after the end of treatment. Due to the uncertainties surrounding COVID-19 and the desire of Summit to not delay the understanding of potential clinical practice-changing data, Summit combined the two trials, formerly known as “Ri-CoDIFy 1” and "Ri-CoDIFy 2,” into a single study. We refer to this Phase III clinical trial as "Ri-CoDIFy." We dosed the first patient in our Phase III clinical trials in February 2019. We enrolled 759 patients in the combined Ri-CoDIFy clinical trial. On December 20, 2021, we announced topline results for the Phase III Ri-CoDIFy study. The study showed that ridinilazole resulted in a numerically higher SCR rate than vancomycin but did not meet the study’s primary endpoint for superiority. We will continue to evaluate the underlying data and perform additional analyses, including analyses specific to the microbiome. In November 2015, we reported top-line results from our double blind, randomized, active controlled Phase II clinical trial that evaluated ridinilazole compared to the current standard-of-care, vancomycin, for the treatment of CDI. The Phase II clinical trial showed its primary endpoint of non-inferiority, with ridinilazole achieving statistical significance in testing the non-inferiority hypothesis to vancomycin in SCR. We subsequently reported that data from our Phase II clinical trial also showed ridinilazole to be highly preserving of the gut microbiome and secondary bile acids compared to patients who received vancomycin and experienced substantial damage to the gut microbiome, which for many patients persisted during the 30-day post-treatment period. In September 2017, we reported top-line data from our exploratory, open label, active controlled Phase II clinical trial evaluating ridinilazole compared to fidaxomicin for the treatment of CDI. In the trial, ridinilazole preserved the gut microbiome of CDI patients to a greater extent than fidaxomicin, achieving a key secondary endpoint. The overall safety profile of ridinilazole remains unchanged. 4 Ridinilazole Clinical Development Phase III Clinical Trial Program In the Ri-CoDIFy trial, we randomized patients in a one-to-one ratio to receive either a 200 mg dose of ridinilazole tetrahydrate administered twice per day for ten days or a 125 mg dose of vancomycin administered four times per day for ten days. Due to the different treatment regimens, we developed dummy placebos that are administered to the patients in the Phase III clinical trials according to a schedule designed to maintain the blind within each trial. Enrolled patients in Ri-CoDIFy were required to be at least 18 years of age or older, have a confirmed diagnosis of CDI as measured by the presence of toxin A and/or toxin B of C. difficile in the stool as confirmed by a positive free toxin test, and must not have had more than one prior episode of CDI in the previous three months, or more than three episodes in the prior 12 months. The Ri-CoDIFy Phase III clinical trial was designed to assess, as its primary endpoint, the superiority of ridinilazole compared to vancomycin in Sustained Clinical Response, or SCR, which was defined as Clinical Response of the treated episode of CDI and no recurrence of CDI through 30 days after the end of treatment. Additional endpoints included Clinical Response ("CR"), recurrence rate, safety and tolerability, analyses of the gut microbiome and metabolome, in addition to quality of life and health economic outcome measures. On December 20, 2021, we announced topline results for the Phase III Ri-CoDIFy study evaluating ridinilazole for the treatment of and Sustained Clinical Response for patients suffering from C. difficile infection. The study showed that ridinilazole resulted in a numerically higher SCR rate than vancomycin but did not meet the study’s primary endpoint for superiority. We will continue to evaluate the underlying data, including analyses specific to the microbiome. Phase II Clinical Trial in Patients with CDI In November 2015, we reported top-line results from our randomized, double blind, active controlled, multicenter, Phase II clinical trial of ridinilazole in patients with CDI, and we subsequently presented additional data. We referred to this as our Phase II proof of concept clinical trial and as the "CoDIFy" study. We conducted this clinical trial at approximately 35 sites in the United States and Canada. The trial was conducted under an Investigational New Drug Application, or IND, that we submitted to the FDA in January 2014. We enrolled a total of 100 patients between 18 to 90 years of age. The trial randomized patients in a one-to-one ratio to receive either a 200 mg dose of ridinilazole tetrahydrate administered twice per day for ten days or a 125 mg dose of vancomycin administered four times per day for ten days. The primary objective of this clinical trial was to evaluate the efficacy of ten days of dosing with ridinilazole compared to treatment with vancomycin. The primary efficacy endpoint was non-inferiority on sustained clinical response, or SCR, which was defined as clinical cure based on the resolution of diarrhea at the test of cure, or TOC, visit on day 12 and no recurrence of CDI within 30 days after the end of treatment. The secondary efficacy endpoints were investigator assessed clinical response at the TOC visit and rate of recurrence of CDI within 30 days after the end of treatment. Secondary objectives of this clinical trial were the assessment of the safety and tolerability of ten days of dosing of ridinilazole compared to vancomycin, the plasma and fecal concentrations of ridinilazole in patients with CDI who received ridinilazole and the health status of CDI patients who received ten days of treatment of ridinilazole compared to patients who received ten days of treatment of vancomycin. We also assessed the impact of vancomycin or ridinilazole on the gut microbiome of patients in the clinical trial as one of a number of exploratory objectives. Analysis of Results We observed the following results in our Phase II proof of concept trial: • Ridinilazole Demonstrated Statistical Superiority Over Vancomycin for the Primary Endpoint. Our Phase II proof of concept trial met its primary endpoint with ridinilazole achieving a SCR rate of 66.7% compared to 42.4% for vancomycin (non-inferiority margin of 15%, p=0.0004 for testing non-inferiority). At the pre-specified 2-sided alpha level of 0.10, ridinilazole was statistically superior to vancomycin. The primary analysis was conducted on the modified intent-to-treat, or mITT, population (36 patients dosed with ridinilazole, 33 patients dosed with vancomycin) that comprised patients with CDI confirmed by the presence of free toxin in feces. We also observed a generally consistent trend of improved SCR with ridinilazole across subgroups at higher risk of recurrence, including the elderly, patients who were on concomitant antibiotics at the start of treatment and patients with a prior history of CDI. • Ridinilazole Demonstrated a Large Reduction in Rates of Recurrence Compared to Vancomycin. We observed that the statistical superiority at 2-sided alpha of 0.10 (which was prespecified in the protocol) in SCR with ridinilazole compared to vancomycin was driven by a large numerical reduction in rates of disease recurrence. Clinical cure rates at the end of ten days of treatment were similar, with ridinilazole achieving a rate of 77.8% compared to 69.7% for 5 vancomycin, but ridinilazole achieved a recurrence rate of 14.3% compared to 34.8% for vancomycin during the 30-day post-treatment period. • Ridinilazole had Minimal Impact on the Gut Microbiome. The microbiome primary analysis of the Phase II study was performed on fecal samples collected from CDI patients at baseline, and at end of therapy (EOT, Day 10). This analysis showed that ridinilazole had minimal impact on the gut microbiome diversity and composition compared to vancomycin indicating a smaller impact on microbiota health and preservation of resistance to infections. No or minimal loss in alpha-diversity was observed following 10 days treatment with ridinilazole, whereas a significant loss in diversity was observed with vancomycin. Ridinilazole also showed minimal impact on the gut microbiome composition with significant reductions in relative abundance limited to only a few taxa from the Firmicutes: 36-fold reduction of the Peptostreptococcaceae family that contains C. difficil e, and 15-fold and 10-fold reductions of the Ruminococacceae and Clostridiaceae, respectively. In contrast, vancomycin resulted in significant reductions in the relative abundance of several families in the Firmicutes (e.g. >1000-fold for Lachnospiraceae and >500-fold for Ruminococcaceae), in the Bacteroidetes (>1000- fold) and in the Actinobacteria (5-fold) phyla. These impacts are demonstrated in the illustraiont below. These reductions were associated with a >20-fold increase in the Proteobacteria and, in particular, a >200-fold increase in Enterobacteriaceae and >1000-fold increase in Klebsiella spp . This further gut dysbiosis with the expansion of Enterobacteriaceae pathogens may put patients at risk for subsequent infections, including multi-drug resistant pathogens such as the carbapenem-resistant K. pneumoniae . Differential impact of ridinilazole and vancomycin on the gut microbiota Changes in relative abundance of bacterial taxa in CDI patients after 10 day-treatment with ridinilazole or vancomycin Red : l ower abundance at the end of treatment Green: higher abundance at the end of treatment • Ridinilazole Preserved the Gut Bile Acid Composition. Bile acids are metabolized by bacteria within the gut. These bile acids exist in different forms that can either favor or block the growth of C. difficile . As expected, in healthy controls, bile acids that can block C. difficile growth, i.e., the protective bile acids were predominant while in Phase II CDI patients bile acids that can promote C. difficile growth were predominant. Ridinilazole treatment preserved the gut bile acid composition and allowed a gradual normalization post-treatment. At 30 days post-EOT, the bile acid composition of ridinilazole-treated patients trended towards that of healthy subjects showing a predominance of the protective bile acids. In contrast, vancomycin treatment resulted in further alteration of the bile acid composition and a significant decrease of the protective bile acids to < 1% of the total bile acids at EOT. At 30 days post-EOT, their bile acid profile was similar to that observed in the CDI patients prior to therapy, potentially predisposing vancomycin- treated patients to recurrence of the infection. Differential impact of ridinilazole and vancomycin on gut bile acids Fecal bile acid composition in healthy control subjects, ridinilazole- and vancomycin-treated subjects 6 BL: baseline; conj: conjugated; D10: Day 10, end-of-treatment; D25: Day 25; D40: Day 40 or 30 days post-EOT • Ridinilazole was Retained in the Gastrointestinal Tract. Ridinilazole was restricted to the gastrointestinal tract, which is the site where CDI occurs in the body. Systemic exposure was close to or below the level of detection in patients with CDI, with plasma concentrations very similar to those observed in our Phase I clinical trial in healthy volunteers. • Ridinilazole Reduced Biomarkers of Inflammation. We measured levels of two key markers of inflammation, calprotectin and lactoferrin, in feces collected from the 69 patients who comprised the mITT group. The samples analyzed were collected at the time of randomization (prior to initiation of treatment), at day five and at day ten. We observed that ridinilazole and vancomycin reduced concentrations of calprotectin and lactoferrin by similar levels when analyzing the results for all patients. We also observed that a subset of patients with severe CDI had a greater reduction in levels of calprotectin and lactoferrin when treated with ridinilazole compared to vancomycin. We believe these data indicate that ridinilazole is associated with a greater reduction in inflammatory markers compared to vancomycin in patients with severe CDI. • Ridinilazole Significantly Improved Short- and Longer-Term Quality of Life Measures. Patients completed the EuroQol 5-Dimension questionnaire (three level version; EQ-5D-3L) at baseline, day 5, day 10, day 12 and day 40 to assess the impact of treatment with ridinilazole and vancomycin on five dimensions of physical and mental health: mobility, self-care, usual activities, pain/discomfort and anxiety/depression. As early as day 5, ridinilazole-treated patients reported improvements in index scores (p=0.008), a measure that combines scores from the five domains and visual analogue scale, or VAS, scores (p=0.01), which is a self-reported score of overall health. More specifically, by day 40, patients treated with ridinilazole had improved significantly more than patients treated with vancomycin in anxiety and depression measures. In addition, while both treatment arms showed significant improvements in pain and discomfort with treatment, by day 10, fewer patients treated with ridinilazole reported issues than did those treated with vancomycin. We believe these findings support the potential for the benefits of treatment with ridinilazole to extend beyond clinical benefits to the overall wellbeing of the patient. • Ridinilazole was Well Tolerated. Ridinilazole was generally well tolerated. The overall rate of adverse events and serious adverse events reported in the ridinilazole and vancomycin treatment arms were comparable. Phase II Exploratory Clinical Trial of Ridinilazole Compared to Fidaxomicin In September 2017, we reported top-line data from our randomized, open label, active controlled, multicenter Phase II clinical trial evaluating ridinilazole compared to fidaxomicin for the treatment of CDI. This exploratory clinical trial was designed to generate data comparing ridinilazole to fidaxomicin, a CDI antibiotic launched in 2011, and the results of this clinical trial are expected to help to inform the commercial positioning of ridinilazole. We conducted this clinical trial at sites in the United Kingdom, Europe and the United States, enrolling 27 patients between 18 and 90 years of age. We randomized patients in a one-to-one ratio to receive either a 200 mg dose of ridinilazole tetrahydrate administered twice per day for ten days or a 200 mg dose of fidaxomicin administered twice per day for ten days. The trial population was unbalanced with more patients randomized to ridinilazole having predisposing factors for recurrent CDI, and at a higher risk of poorer clinical outcomes as measured by ATLAS score, a tool for evaluating CDI in patients by age, temperature, leukocytes and albumin levels, and use of systemic antibiotics. The primary efficacy objective of this clinical trial was to determine the safety and tolerability of ten days of dosing with 200 mg BID of ridinilazole tetrahydrate compared to dosing with 200 mg BID of fidaxomicin. The secondary objectives of the clinical trial were to assess the following: • the plasma pharmacokinetics of ridinilazole in patients with CDI; 7 • the qualitative and quantitative effect of ridinilazole and fidaxomicin on the gut microbiome; • the plasma, urine and fecal concentrations of ridinilazole and its metabolites; and • the efficacy of ten days of dosing with ridinilazole compared to fidaxomicin for the treatment of CDI. The measurement of efficacy was based on investigator assessed clinical response at the test of cure, or TOC, visit, with clinical cure defined as resolution of diarrhea while on treatment and maintained at the TOC visit, and sustained clinical response, defined as clinical cure at the TOC visit and no recurrence of CDI within 30 days after the end of treatment. We reported the following findings: • Ridinilazole Preserved the Microbiome to a Greater Extent than Fidaxomicin. We observed that the ten days treatment with ridinilazole had markedly less of an impact on the gut microbiome of trial patients by measures of overall diversity and changes in key bacterial groups when compared to those trial patients dosed with fidaxomicin. We observed that while ridinilazole and fidaxomicin both reduced the abundance of C. difficile , fidaxomicin treated patients had reduced abundance of other bacterial families, including the Ruminococcaceae family from the Firmicutes, that are thought to have direct functional roles in protecting against CDI. We observed that for a number of these bacterial families, the difference between the two treatments reached statistical significance. We also reported alpha diversity, as measured by the Simpson's Diversity Index, as another measure of microbiome health. We observed a greater reduction in alpha-diversity during fidaxomicin treatment compared with ridinilazole treatment. These measures were a key secondary endpoint of the trial. We believe that these measures provide further evidence of ridinilazole's precision in killing C. difficile while preserving the gut. • Ridinilazole was Well Tolerated. The primary endpoint of the trial was safety, as measured by the number of treatment emergent adverse events and serious adverse events. During the trial, no new or unexpected safety signals were identified and ridinilazole was well tolerated. • Comparable Rates of Sustained Clinical Response. We observed that seven of the 14 ridinilazole-treated patients and six of the 13 fidaxomicin-treated patients were cured at the end of treatment and did not have a recurrence of CDI within the following 30 days to achieve a sustained clinical response. The trial was however not designed for efficacy comparisons due to the small number of patients enrolled, and so we believe no conclusions on efficacy should be made based solely on these data. Phase I Clinical Trial in Healthy Volunteers In 2013, we completed a randomized, partially blind, placebo-controlled Phase I clinical trial of ridinilazole in healthy volunteers. We conducted this clinical trial at a single site in the United Kingdom under approval from the U.K. Medicines and Healthcare products Regulatory Agency, or MHRA, and the Ethics Review Committee. We enrolled 56 healthy male subjects in the clinical trial who were between 18 and 55 years of age. The primary objective of the clinical trial was to determine the safety and tolerability of single and multiple ascending oral doses of ridinilazole. The secondary objectives included determining the single and multiple oral dose pharmacokinetics of ridinilazole, assessing the effect of food on systemic exposure of ridinilazole and assessing the effect of multiple oral doses of ridinilazole on gut flora. We conducted the clinical trial in two parts. Part 1 consisted of an ascending single dose study and a food effect evaluation study. In Part 1, we evaluated a total of 40 subjects, divided into the following six cohorts: • four fasted subjects, randomized for three subjects to receive a single 2 mg dose of ridinilazole and one subject to receive placebo; • four fasted subjects, randomized for three subjects to receive a single 20 mg dose of ridinilazole and one subject to receive placebo; • eight fasted subjects, randomized for six subjects to receive a single 100 mg dose of ridinilazole and two subjects to receive placebo; • eight fasted subjects, randomized for six subjects to receive a single 400 mg dose of ridinilazole and two subjects to receive placebo; • eight fasted subjects, randomized for six subjects to receive a single 2,000 mg dose of ridinilazole and two subjects to receive placebo; and 8 • eight subjects, randomized for six subjects to receive a single 1,000 mg dose of ridinilazole under fasted conditions and a single 1,000 mg dose under fed conditions, and two subjects to receive two single doses of placebo on the same dosing schedule. The doses under fed and fasted conditions were separated by a minimum of six days. Part 2 of the clinical trial consisted of a multiple dose study. In Part 2, we evaluated a total of 16 subjects, who were divided into the following two cohorts: • eight subjects randomized for six subjects to receive 200 mg doses of ridinilazole twice per day for nine days with a single final dose on day ten and two subjects to receive placebo on the same dosing schedule; and • eight subjects randomized for six subjects to receive 500 mg doses of ridinilazole twice per day for nine days with a single final dose on day ten and two subjects to receive placebo on the same dosing schedule. Analysis of Trial Results We observed the following results in this clinical trial: • Ridinilazole was Well Tolerated. Ridinilazole was well tolerated at all doses tested in the clinical trial. The incidence of adverse events in the clinical trial was low for patients treated with ridinilazole and comparable to the incidence of adverse events for patients receiving placebo. The majority of the adverse events that were considered to be possibly related to ridinilazole were classified as gastrointestinal disorders and were mild in severity and resolved without intervention. One patient withdrew from the clinical trial after suffering from appendicitis on day one. The trial investigator determined this serious adverse event was unlikely to be related to treatment with ridinilazole. • Ridinilazole was Retained in the Gastrointestinal Tract. Ridinilazole was targeted to the gastrointestinal tract, which is the site where CDI occurs in the body. Systemic exposure was close to or below the level of detection in both fed and fasted subjects. • Ridinilazole was Highly Selective for Total Clostridia Bacteria with Minimal Impact on Other Natural Gut Flora. We measured levels of bacteria in fecal samples from Part 2 of the clinical trial for gut microbiome composition on the day prior to commencement of dosing and on days four and nine of the 10-day treatment. In both the 200 mg BID and 500 mg BID dose cohorts, median levels of key bacteria groups that comprise the natural gut microbiome remained relatively constant during this period and did not fluctuate substantially from baseline. The one exception was the total clostridia bacterial group which decreased from the baseline level to zero by day four of dosing and remained at zero on day nine of dosing. We did not detect any C. difficile viable cells or spores in the fecal samples of any of the healthy volunteer subjects at any point during the clinical trial. Thus, ridinilazole affected the count of clostridia other than C. difficile but not of any other bacteria groups that comprise the gut microbiome. CDI Preclinical Data In a range of preclinical studies, ridinilazole demonstrated an encouraging profile as a potential antibiotic for the treatment of initial CDI and reduction of CDI recurrence. The following is a summary of key observations from these studies: • Potency Against C. difficile . We screened the in vitro activity of ridinilazole and a range of different comparators including fidaxomicin, metronidazole and vancomycin against nearly 700 C. difficile clinical isolates. Clinical isolates have been collected in Europe, U.S. and Asia-Pacific and included a range of ribotypes including the hypervirulent ribotype RT 027 and most common ribotypes in Europe and U.S. In these studies, ridinilazole was highly potent against all C. difficile clinical isolates, either equally potent to, or more potent than, fidaxomicin and more potent than both vancomycin and metronidazole. Ridinilazole did not display evidence of cross resistance with other classes of key antibiotics in common use. • Targeted Spectrum of Activity . We conducted in vitro testing of ridinilazole, vancomycin, metronidazole and fidaxomicin against a wide panel of bacteria that are commonly found in the gut microbiome and are necessary for normal function of the gastrointestinal tract and also have wide implications on human health, such as the proper function of the immune system. As illustrated in the figure below, in this study ridinilazole had minimal activity against these beneficial bacterial groups. Ridinilazole also displayed higher selectivity for C. difficile in this study as compared to vancomycin, metronidazole and fidaxomicin. In vitro potency is measured by determining the concentration of a drug (in micrograms per milliliter) needed to inhibit the growth of 90% of the bacterial strains being tested, referred to as a MIC90 measurement. A high number, typically higher than 256, indicates a weak antimicrobial effect, and a low number, typically less than eight, indicates a potent antimicrobial effect. We believe that the targeted spectrum of activity for ridinilazole seen in this study compared to the relatively broad-spectrum of activity of other antibiotics indicates the potential for ridinilazole to selectively target C. difficile bacteria while preserving the microbiome and thereby reduce CDI recurrence rates. 9 Profile of Selectivity of Ridinilazole vs. Other CDI Antibiotics • Novel Mechanism of Action (MOA) . Ridinilazole is believed to drive its bactericidal effect through a novel MoA that results in lethal perturbation of cell division. We have conducted further studies to characterize the MoA. It has now been demonstrated that ridinilizole is able to bind, with high affinity, to the minor groove of double-stranded DNA substrates, including C. difficile genomic DNA. Cell imaging using fluorescence confocal microscopy has revealed that ridinilazole exclusively co-localizes with genomic DNA in C. difficile. DNA binding is believed to be the primary mechanism through which ridinilazole exerts its bactericidal activity in C. difficile . Further studies will be conducted to determine the biological consequences of ridinilazole binding to genomic DNA in C. difficile . • Protection Against CDI Recurrence . In a hamster model, we infected one group of hamsters with a C. difficile strain from the hypervirulent ribotype 027 and a second group of hamsters with the C. difficile virulent reference strain 630, ribotype 012. Hamsters from each group were treated for 5 days with different doses of ridinilazole, vancomycin and fidaxomicin and recurrence of the infection was evaluated over the 21 days following treatment. In this hamster model, a hamster fatality within the first five days is a result of initial C. difficile infection, while a fatality from day six to day 25 is a result of recurrent disease. As illustrated in the figure below, the hamsters treated with two different doses of ridinilazole had survival rates of 90% to 100% against strain ribotype 027 and 80% to 100% against strain ribotype 012. These survival rates were higher than hamsters treated with vancomycin (0% to 10% survival rates) for both CDI strains, comparable to hamsters treated with two different doses of fidaxomicin against strain ribotype 027 (90% to 100% survival rates) and higher than hamsters treated with two different doses of fidaxomicin against strain ribotype 012 (0% to 40% survival rates). All infection control hamsters received placebo and died by the second day following infection. • Ridinilazole Arrests Cell Division. In in vitro studies, treatment of C. difficile bacteria prevented bacterial replication, eventually resulting in death of the bacterial cells. We have also observed significant increases in the length of C. difficile cells and an absence of division septum formation, suggesting replication is halted by prevention of bacterial division. • Inhibition of Sporulation. C. difficile can form spores – a dormant, protected form of the bacterium which contributes to infection recurrence, is highly resistant to standard cleaning practices and leads to environmental persistence and disease transmission. During in vitro studies, we found that treatment of C. difficile with ridinilazole at concentrations which prevent bacterial replication also prevents sporulation. We believe that inhibition of sporulation may help reduce the incidence of recurrent disease. 10 • Reduction in Toxin Levels in vitro. C. difficile produces toxins A and B to elicit an inflammatory response in the host, resulting in the symptoms of the disease including severe diarrhea. We found during in vitro studies that treatment of C. difficile with ridinilazole at concentrations which prevent bacterial replication reduce toxin A and B production. • Low Propensity for Resistance. In vitro studies exposing C. difficile to ridinilazole have shown that the frequency of spontaneous resistance to ridinilazole is low. Resistant mutants that do arise, or are forcefully selected for by passaging in the presence of sub-inhibitory levels of ridinilazole, importantly showed no cross-resistance to other standard-of- care antibiotics. • Concomitant Antibiotic Use. In an in vitro bacterial culture study, we exposed C. difficile to ridinilazole in combination with selected other antibiotics. In this study, concomitant use of antibiotics had neither a synergistic nor an antagonistic effect on the minimal inhibitory concentration of ridinilazole, with the exception of lincosamide antibiotics (clindamycin and lincomycin). For these compounds, an additive (nearly synergistic) interaction was observed. We believe these results indicate that concomitant use of other antibiotics will not diminish the potency of ridinilazole. This is an important finding because a significant portion of CDI patients receive antibiotic treatment for persistent or new infections. Other Pipeline Product Candidates Discuva Platform Our Discuva Platform is a genetics-based technology that can be used throughout the stages of drug discovery from hit-to-lead through candidate selection. Our Discuva Platform aligns modified bacterial transposon mutagenesis with next generation sequencing and a proprietary end user interface. The Discuva Platform uses pathogen specific transposons. Transposons are small segments of DNA that are capable of replicating and inserting copies of DNA at random sites in the same or a different chromosome. Our pathogen specific transposons have three different activating promoters to drive bacterial gene upregulation, to cause gene disruption, or cause the downregulation of bacterial gene expression. There is a single transposon insertion per genome. The density of transposon insertion at the different genomic loci is determined in the whole library with insertion rates potentially being as high as every two to three base pairs. We believe that our Discuva Platform has three principal uses: i) Identifying Essential Genes in Bacteria. We are able to use our Discuva Platform to identify genes within bacteria that are essential for their survival. This allows us to identify new bacterial targets against which to develop new antibiotic drugs. ii) Elucidating Mechanism of Action. We are able to use our Discuva Platform to elucidate the mechanism of action of a compound to be inferred by the genes that are upregulated during experiments when in the presence of a drug. We are able to rapidly identify the mechanism of action of a potential drug and this represents an important capability of our Discuva Platform. We have been able to validate the ability of our Discuva Platform to elucidate mechanisms of action by testing antibiotic compounds representative of known classes whose mechanisms of action are known. iii) Understanding Emergent Mechanisms of Resistance. We are able to use our Discuva Platform to test a compound’s susceptibility towards known mechanisms of antibiotic resistance to allow us to select potential drug candidates with what we believe will be much better resistance profiles. We believe the importance of understanding patients prior to the development of widespread resistance. Enterobacteriaceae Program We are developing a new mechanism novel small molecule antibiotic (SMT-738 which has originated from our DDS-04 series) for the potential treatment of infections caused by the Enterobacteriaceae, a family of Gram-negative bacteria which includes E. coli and Klebsiella species. Enterobacteriaceae are responsible for causing serious infections across multiple indications, for example bloodstream infections, urinary tract infections and hospital-acquired pneumonias. Multi-Drug Resistant (“MDR”) Enterobacteriaceae are resistant to treatment by most or occasionally all existing classes of known antibiotics. The most difficult to treat infections are those caused by the Extended Spectrum Beta-Lactamase (“ESBL”)-producing Enterobacteriaceae and the Carbapenem-resistant Enterobacteriaceae (“CRE”). According to the CDC, ESBL-producing and CRE Enterobacteriaceae have collectively caused an estimated 197,400 infections and 9,100 deaths in hospitalized patients in the United States in 2019. We identified the novel DDS-04 series using our Discuva Platform and, like ridinilazole, the DDS-04 series has a targeted- spectrum of activity, in this case highly specific for Enterobacteriaceae. The DDS-04 series act via a clinically unexploited target, LolCDE, which is involved in the transport of lipoproteins from the inner to outer membrane in Gram-negative bacteria. The cell membrane is crucial for cell viability and the lol genes are essential in bacteria such as E.coli . In April 2019, we 11 reported data that showed our DDS-04 series to be rapidly bactericidal and highly potent across globally diverse Enterobacteriaceae strains, including multi-drug resistant isolates. Importantly, our DDS-04 series has a low propensity for resistance development and displays no cross resistance with existing classes of antibiotics. In July 2019, we reported initial, positive proof of concept data on an exemplar compound from our DDS-04 series across in vivo rodent models of sepsis, urinary tract infection, and pneumonia with further data presented in September 2019. On May 18, 2021, we announced SMT026738 (“SMT-738”) as our preclinical candidate to combat multidrug resistant infections, specifically Carbapenem-resistant Enterobacteriaceae (“CRE”) infections. SMT-738 is the first of a novel class of precision antibiotics. Combining a novel antibiotic class (SMT-738) with a clinically unexploited target (LolCDE) mitigates the risk of pre-existing resistance, potentially allowing for the effective treatment of infections caused by Enterobacteriaceae that currently have very limited and failing treatment options due to resistance to existing antibiotic classes. We retain worldwide clinical development and commercial rights to SMT-738. We have been and plan to continue to perform IND-enabling activities. Our Collaborations and Funding Arrangements BARDA In September 2017, we were awarded a contract from the Biomedical Advanced Research and Development Authority, or BARDA, to fund, in part, the clinical and regulatory development of ridinilazole for the treatment of infections caused by C. difficile . The contract includes a base period with federal government funding of approximately $32.0 million. In addition, there are three option work segments that, if exercised in full by BARDA, would increase the total federal government funding under the contract to approximately $62.0 million. In August 2018, BARDA exercised one of the option work segments worth $12 million. In June 2019, BARDA increased the total value of the funding contract to up to $63.7 million and also exercised a second option work segment worth $9.6 million. In January 2020, BARDA increased the contract by a further $8.8 million. This increased the total value of the funding contract to $72.5 million and brought the total amount of committed BARDA funding to $62.4 million. 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. As of December 31, 2021, an aggregate of $56.5 million of the total committed BARDA funding has been received and the Company has recognized $50.3 million of cumulative income since contract inception. The contract provides for a cost-sharing arrangement under which BARDA funds a specified portion of estimated costs for the continued clinical and regulatory development of ridinilazole for CDI. Under this cost sharing arrangement, we are responsible for a portion of the costs associated with each segment of work, including any costs in excess of the estimated amounts. During the base period of the contract, BARDA agreed to fund, in part, activities for our two Phase III clinical trials of ridinilazole, which were later combined into one trial (Ri-CoDIFy), and included obtaining requisite regulatory approvals for the opening of trial sites, arranging for the manufacture of clinical supply of ridinilazole and engaging third-party contract research organizations to conduct the clinical trials including initial patient enrollment and treatment. Under the original terms of the award, the three option work segments, if exercised in full, provided for up to an additional $30 million of funding from BARDA to support the development of ridinilazole through to potential submission of applications for marketing approval. As described above, the award was amended twice, bringing the total of additional funding available beyond the base period to $40.5 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. In January 2020, BARDA increased its award by $8.8 million, with this additional funding to support a new clinical trial in adolescent patients. 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 option work segment is an independent, discrete work segment that is eligible to be exercised, in BARDA’s sole discretion, upon the completion of agreed-upon milestones and deliverables. If this option work segment is exercised by BARDA, the contract will run through April 2022, unless extended by us and BARDA. The contract specifies the plan of activities to be conducted under the contract. In addition to our obligations to conduct the activities provided for by the plan, we are obligated to satisfy various federal reporting requirements, addressing clinical progress, technical issues, and intellectual property and financial matters. Payments to us under the contract are expected to be made monthly after we invoice BARDA for allowable costs that have been incurred. BARDA may terminate this agreement upon our uncured default in our performance of the agreement or at any time if the contracting officer determines that it is in the U.S. government’s interest to terminate the agreement. 12 Under standard U.S. government contracting terms, the U.S. government receives only limited rights for government use of certain of our pre-existing data and certain data produced with non-federal funding, to the extent such data are required for delivery to BARDA under the contract. The U.S. government receives unlimited rights to use and disclose new data first produced under the contract with BARDA. Except for commercialization rights to ridinilazole in South America, Central America and the Caribbean, we currently have exclusive worldwide commercialization rights to ridinilazole and retain these rights under the BARDA contract. However, the U.S. government is entitled to a nonexclusive, nontransferable, worldwide, royalty-free license to practice or have practiced any patent on an invention that is conceived or first reduced to practice under the contract, which is referred to as a subject invention. In addition, the U.S. government may obtain additional rights if we do not elect to retain ownership of a subject invention or if we do not satisfy certain disclosure and patent prosecution obligations with respect to a subject invention. Furthermore, the government is entitled to march-in rights under our contract with BARDA. March-in rights permit the U.S. government to require that we grant a license to a subject invention to a third party if we have not taken effective steps to achieve practical application of the invention within a reasonable time; if such action is necessary to meet health and safety needs and/or requirements for public use that we are not meeting; or if we have not obtained from any exclusive licensee the required agreement for manufacturing such invention substantially in the United States or a waiver of this requirement. Wellcome Trust In October 2012, we entered into a translation award funding agreement with the Wellcome Trust Limited, as trustee of the Wellcome Trust, in order to support a Phase I and a Phase II clinical trial of ridinilazole for the treatment of CDI. We refer to the translation award funding agreement as the translation award agreement. Under the translation award agreement, we were eligible to receive up to $6.3 million from the Wellcome Trust, of which we received the entire $6.3 million. The translation award agreement followed a funding agreement we and the Wellcome Trust entered in October 2009, which we refer to as the discovery award agreement, under which we received $3.7 million for preclinical development of CDI antibiotics. We refer to any compound or product that is covered by intellectual property rights created under the discovery award agreement or the translation award agreement, or that is covered by intellectual property rights that we created or to which we had rights prior to October 2009 and that relate to the activities under the discovery award agreement or the translation award agreement, as the award products. We agreed to use commercially reasonable efforts to achieve certain development milestones by specified dates. We would be required to make a full or partial repayment to the Wellcome Trust of the funding we received under the translation award agreement, plus accrued interest, under specified conditions, including our unauthorized use of the award amount, our fraudulent or willful misconduct, our knowingly withholding material information from the Wellcome Trust, or an acquisition by certain third parties of all or a material part of our business or assets or of a majority of our equity. Upon such a full repayment, our obligation to share a portion of net revenue with the Wellcome Trust would terminate. Termination Unless earlier terminated by the Wellcome Trust, the translation award agreement will terminate on the earlier of our full repayment of the award amount, plus accrued interest, to the Wellcome Trust following its request for repayment, or the expiration of all payment obligations under the translation award agreement and the revenue sharing agreement. The Wellcome Trust may terminate the translation award agreement for specified reasons, including our material breach or insolvency related events or the Wellcome Trust’s determination that the clinical trials should be terminated due to a serious failure in the progress, management or conduct of the clinical trials, if we do not remedy such condition within a specified period after receiving notice. Assignment We may not, without the Wellcome Trust’s prior consent, assign, transfer or declare a trust over the translation award agreement or otherwise dispose of any of our rights or obligations under the translation award agreement, with such consent not being unreasonably withheld, delayed or conditioned, other than an assignment to our affiliates. Revenue Sharing Agreement The terms of the translation award agreement required us to enter into a revenue sharing agreement with the Wellcome Trust prior to the further development (beyond the Phase II trial supported by the 2012 translational award agreement) and commercialization, which together we refer to as the "Exploitation" of any compound or product that is covered by the intellectual property rights created under the translational award agreement or the discovery award agreement, or that is covered by background intellectual property rights. Under such revenue sharing agreement, the Wellcome Trust would be entitled to a share of the net revenue that we, our affiliates, licensees or third-party collaborators receive under the Exploitation of the award products or any intellectual property associated with such Exploitation. 13 In October 2017, we entered into a revenue sharing agreement with the Wellcome Trust. Under the terms of the revenue sharing agreement: (i) if we commercialize ridinilazole, the Wellcome Trust is eligible to receive a low-single digit percentage of net revenue (as defined in the translation award agreement), and a one-time milestone payment of a specified amount if cumulative net revenues exceed a specified amount; (ii) if a third party commercializes ridinilazole, the Wellcome Trust is eligible to receive a mid-single digit percentage of the net revenues we receive from commercial sales by such third party, and a one-time milestone payment of a specified amount if cumulative net revenues we receive exceed a specified amount. In addition, following the first commercial sale by such third party, the Wellcome Trust is eligible to receive a one-time milestone payment equal to a low-single digit percentage of the aggregate amount of any pre-commercial payments we receive from third-party licensees prior to such commercial sale; and (iii) in the event of an assignment or sale of the assets or intellectual property pertaining to ridinilazole, the net proceeds we receive from such assignment or sale would be treated as net revenue under the revenue sharing agreement. Under the revenue sharing agreement, it was agreed that any development funding or grant funding we receive from BARDA or other third parties, including licensees, would not be classified as net revenue or as a pre-commercial payment. In addition, under the revenue sharing agreement, the Wellcome Trust agreed to terminate all of its rights under the translation award agreement to develop or commercialize the award products or the related intellectual property in specified markets and in specified indications, in the event that we were not developing or commercializing the award products or such intellectual property for such markets or in such indications. Unless earlier terminated, the revenue sharing agreement will expire upon the later of the expiration of the last patent or patent application covering ridinilazole; the expiration of any agreement or payment obligations that we have entered into with a third party relating to the Exploitation of ridinilazole; or the expiration of any payment obligations owed to the Wellcome Trust relating to the Exploitation of ridinilazole. In addition, each party has the right to terminate the revenue sharing agreement if the other party materially breaches the agreement, and the breach remains uncured for a specified period or the breach is uncurable, or if the other party experiences specified insolvency related events. Eurofarma Laboratórios S.A. In December 2017, we entered into an exclusive license and commercialization agreement with Eurofarma, pursuant to which we granted Eurofarma the exclusive right 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, which we refer to as the licensed territory. We have retained commercialization rights in the rest of the world. Financial Terms Under the terms of the license agreement, we received an upfront payment of $2.5 million and are entitled to receive additional development milestones upon the achievement of staged patient enrollment targets in the licensed territory in our Ri-CoDIFy 1 and Ri-CoDIFy 2 Phase III clinical trials for ridinilazole. In February 2020, we achieved the first of these patient enrollment targets to trigger a milestone payment of $1.0 million. In September 2021, we reached the second enrollment milestone and earned $1.25 million. In addition, we could receive an additional $1.5 million in various development milestones. We are eligible to receive a further $1.0 million in development milestones, $2.4 million in commercial milestones and up to $18.0 million in sales milestones when cumulative net sales equal or exceed $100.0 million in the Eurofarma licensed territory. Each subsequent achievement of an additional $100.0 million in cumulative net sales will result in Summit receiving additional milestone payments, which, when combined with anticipated product supply transfer payments from Eurofarma paid to us in connection with a commercial supply agreement to be entered into between the two parties, will provide payments estimated to range from a mid-teens to high-teens percentage of cumulative net sales in the Eurofarma licensed territory. We estimate such product supply transfer payments from Eurofarma will range from a high single-digit to low double-digit percentage of cumulative net sales in the licensed territory. Regulatory and Commercial Under the license agreement, Eurofarma is responsible for all costs related to obtaining regulatory approval of ridinilazole in the licensed territory and is obligated to use commercially reasonable efforts to file applications for regulatory approval in specified countries in the licensed territory within a specified time period after we have filed an application for regulatory approval, or obtained regulatory approval, for ridinilazole in a jurisdiction where we retain commercial rights. We retain sole responsibility for the clinical development of ridinilazole in all countries and are responsible for all costs related to obtaining regulatory approval for ridinilazole outside of the licensed territory. We are obligated to use commercially reasonable efforts to supply or cause to be supplied to Eurofarma sufficient commercial supply of ridinilazole, and Eurofarma has agreed to purchase its supply of ridinilazole exclusively from us. If we are unable to supply Eurofarma with commercial supply of ridinilazole during the term of the agreement, we are obligated to transfer to 14 Eurofarma or its third-party suppliers’ know-how that would be needed for Eurofarma or its third-party suppliers to manufacture the product for commercial sale in the licensed territory. CARB-X In July 2018, we were granted a sub-award of up to $4.5 million from the Trustees of Boston University under the Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator program (“CARB-X”) to fund, in part, the development of new mechanism antibiotics for the potential treatment of infections caused by gonorrhea. Under our CARB-X award, we received an initial $2.0 million in funding from CARB-X in July 2018. In February 2020, CARB-X increased the value of the initial funding by $1.2 million. The remaining $2.5 million was split into two option segments. In the third quarter of 2020, we made the decision not to advance the DDS-01 series of antibiotics and to cease work on the gonorrhoeae program based on toxicology data from preclinical studies. Given we have ceased work on the DDS-01 series in 2020, no additional funding has been received by CARB-X in 2021 pursuant to this sub-award. In May 2021, we announced the selection of a new preclinical candidate, SMT-738, which originated from the DDS-04 series. SMT-738 is being developed to combat multi-drug resistant infections, specifically Carbapenem-resistant Enterobacteriaceae ("CRE") infections. Simultaneously, Summit has received a sub-award from CARB-X to progress SMT-738 through preclinical development and an option to continue into Phase Ia clinical studies. The award commits initial non-dilutive funding of up to $4.1 million for the preclinical phase, with the potential for a further $3.7 million available for the Phase Ia clinical phase upon successfully achieving key preclinical development milestones. As of December 31, 2021, $0.5 million of grant funding from CARB-X has been received, $0.1 million is in accounts receivable for amounts billed, $0.6 million is in other current assets as a contract asset and we have recognized $1.2 million of cumulative income since contract inception. University College London On March 23, 2010, we entered into a collaborative research agreement with the School of Pharmacy, University of London which was later novated on November 28, 2011, by the School of Pharmacy to University College London. As part of this agreement, and in consideration of their role in the development of the initial compound series from which ridinilazole was later identified, we agreed to pay the School of Pharmacy (now University College London) a low single-digit share of all revenue received by us in respect of ridinilazole, including any pre-commercial licensing revenue, up to a maximum of £1.0 million. To date, we have paid £0.1 million under this agreement. Discuva Limited Acquisition Share Purchase Agreement In December 2017, we entered into a share purchase agreement with the shareholders of Discuva, a private limited company organized under the laws of England and Wales pursuant to which we acquired all of the outstanding share capital of Discuva. Discuva was a discovery-stage company with a bacterial genetics-based platform that facilitates the discovery and development of new mechanism antibiotics. Under the terms of the share purchase agreement, we paid the Discuva shareholders a total upfront consideration comprised of (A) $6.7 million in cash plus an amount equal to the cash and cash equivalents of Discuva minus (i) indebtedness, (ii) any other liabilities of Discuva at the closing of the transaction that had arisen outside of the ordinary course of business and (iii) funds to be held in escrow and (B) $6.7 million of shares of common stock, satisfied by the issue of 586,685 of our fully-paid shares of common stock at a price per share of $11.41. We made payment of the amount held in escrow, and an additional balancing amount in respect of the closing cash position was made to the Discuva shareholders in December 2018. In addition, the Discuva shareholders will be entitled to receive contingent payments from us based on (i) the receipt of potential research and development tax credits to which Discuva may be entitled for the period from April 1, 2015, to the date of the share purchase agreement and (ii) approximately one-half of the economic benefit from any amounts received in connection with certain payments made to us under an existing collaboration agreement between Discuva and F. Hoffman - La Roche Limited, or Roche. We made two contingent payments to the Discuva shareholders in December 2018 and May 2019 totaling $1.0 million in respect of research and development tax credits for the period from April 2015 to December 2017 (when the acquisition occurred). Separately, certain employees, former employees and former directors of Discuva are eligible for further payments from Discuva of up to $10.6 million based on specified development and clinical milestones related to proprietary product candidates developed under the platform. The share purchase agreement contained customary representations and warranties that we and the selling Discuva shareholders made to each other as of specific dates. The assertions embodied in those representations and warranties were made solely for purposes of the share purchase agreement and may be subject to important qualifications and limitations agreed to by us and the Discuva shareholders in connection with negotiating its terms. Moreover, the representations and warranties may be subject to a contractual standard of materiality that may be different from what may be viewed as material to shareholders or may have been 15 used for the purpose of allocating risk between us and the Discuva shareholders rather than establishing matters as facts. For the foregoing reasons, no person should rely on such representations and warranties as statements of factual information at the time they were made or otherwise. Competition The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. While we believe that our technologies, knowledge, experience, and scientific resources provide us with competitive advantages, we face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions, government agencies, and private and public research institutions. Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future. Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and marketing approved products than we do. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient, or are less expensive than any products that we may develop. Our competitors also may obtain marketing approvals for their products more rapidly than we obtain approval for ours. In addition, our ability to compete may be affected because in some cases insurers or other third-party payors seek to encourage the use of generic products. This may have the effect of making branded products less attractive, from a cost perspective, to buyers. The key competitive factors affecting the success of our product candidates are likely to be their efficacy, safety, convenience, price and the availability of coverage, and reimbursement from government and other third-party payors. The competition for ridinilazole includes the following: 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. We expect that these products will compete with ridinilazole. Antibiotics. 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, Dificlir™ in Europe) is approved for the treatment of CDI in the United States, Japan and the European Union. Fidaxomicin was originally developed by Optimer Pharmaceuticals, Inc., which was later acquired by Cubist Pharmaceuticals, Inc., or Cubist. Cubist was subsequently acquired by Merck & Co., Inc., or Merck. MGB Biopharma Limited is developing MGB-BP-3, a novel antibiotic. In May 2020, top-line results were announced that MGB-BP-3 met endpoints of safety, efficacy and dose selection in an open label, exploratory Phase IIa clinical trial. In January 2021, the company announced a successful end-of-phase II meeting with the FDA, noting the FDA confirmed that the design and the endpoints of their two prospective Phase III studies were appropriate. Acurx Pharmaceuticals Inc. is developing ibezopolstat, a novel antibiotic. In November 2020, top-line results were announced that ibezopolstat met endpoints for efficacy and was reported to be well tolerated with no serious adverse events in an open label, exploratory Phase IIa clinical trial, and ibezopolstat is currently enrolling in a Phase IIb clinical trial. Other CDI approaches. A number of other approaches for the reduction of recurrence of or prevention of CDI are recently approved or in development. One product, bezlotoxumab, has been approved with the indication of reduction of recurrence of CDI. Merck received FDA approval for the monoclonal antibody bezlotoxumab (Zinplava™) in October 2016 and EMA approval in January 2017. Bezlotoxumab is an antibody that neutralizes certain toxins that are produced by C. difficile bacteria and is indicated to reduce recurrence of CDI in patients who are receiving CDI drug treatment and are at high risk of CDI recurrence. An alternative approach to reduce the rate of CDI recurrence is fecal biotherapy, in which products aim to recolonize the bacteria that comprise the natural gut microbiome. These products would be adjunctive therapy to antibiotics used to treat the episode of CDI. Fecal biotherapy approaches in development include SER-109, which is being developed by Seres Therapeutics Inc., formerly Seres Health, Inc., RBX2660, and enema formulation, and RBX7455, an oral formulation, which were originally being developed by Rebiotix Inc., prior to Rebiotix being acquired by Ferring Pharmaceuticals in April 2018, and CP101, which is being developed by Finch Therapeutics. Seres reported top-line results from a Phase III clinical trial 16 of SER-109 in August 2020. The trial met its primary endpoint and Seres expects to meet with the FDA to discuss a potential filing for regulatory approval based on the Phase III data. In May 2020, Rebiotix reported positive preliminary results on the primary efficacy measure from one of its two scheduled Phase III clinical trials of RBX2660; its second Phase III trial is currently enrolling patients. Finch Therapeutics announced positive top-line data from its Phase II clinical trial of CP101 related to the reduction of recurrent episodes of CDI. Several organizations are exploring compounds for the prevention of CDI. Pfizer is developing a vaccine, PF-06425090, that aims to induce a functional antibody response to neutralize the C. difficile bacterial toxins. Pfizer reported positive top-line Phase II results in January 2017. Pfizer entered Phase III testing in 2017, and recently announced results in March 2022. The Phase III trial did not meet its pre-specified primary endpoint of prevention of primary CDI, but two secondary endpoints indicate a highly favorable benefit in reducing CDI severity. Synthetic Biologics, Inc., is developing ribaxamase, an oral enzyme designed to degrade certain IV beta-lactam antibiotics within the GI tract to preserve the natural balance of the microbiome and reduce the risk of colonization by bacteria, including C. difficile, in order to prevent CDI. In January 2017, it was reported that ribaxamase met its primary endpoint in a Phase IIb clinical trial and in November 2018, it announced that it has successfully completed an end-of-Phase II meeting with the FDA to discuss the development of ribaxamase. Pursuant to the meeting, the FDA has proposed criteria for Phase III clinical efficacy and safety which, if achieved, may support submission for marketing approval of ribaxamase on the basis of a single Phase III clinical efficacy and safety, which if achieved, may support submission for marketing approval of ribaxamase on the basis of a single Phase III clinical trial. Da Volterra is developing DAV132, a colon-targeted adsorbent designed to protect the gut microbiome of patients against antibiotic-induced disruption, thus seeking to prevent CDI. DAV132 met its primary endpoint related to safety of DAV132 in a Phase II clinical trial, announced in February 2020. A Phase III trial has commenced with the first patient randomized in July 2021. In November 2020 Destiny Pharma acquired global rights to NTCD-M3, a naturally occurring, non-toxigenic strain of C. difficile bacteria, which lacks the genes that can express C. difficile toxins, for the prevention of recurring CDI. Phase III studies are planned to start in 2022. Manufacturing We do not own or operate, and currently have no plans to establish, manufacturing facilities for the production of clinical or commercial quantities of ridinilazole or for the other compounds that we are evaluating in our infectious disease programs. We currently rely, and expect to continue to rely, on third parties for the manufacture of our product candidates and any products that we may develop. We currently engage a third-party manufacturer to provide clinical material of the API of ridinilazole with a different supplier responsible for drug product manufacturing services that has supplied the final drug product for use in the Phase III clinical program. We believe these suppliers are suitable for commercial manufacture. We are using a different third-party supplier for clinical packaging, labeling and distribution of the finalized ridinilazole drug product. We obtain the supplies of our API and drug products from these manufacturers pursuant to agreements that include specific supply timelines and volume expectations. We obtain the supplies of our product candidates from these manufacturers under master services contracts and specific work orders. We do not currently have arrangements in place for redundant supply or a second source for API for ridinilazole. If any of our current manufacturers should become unavailable to us for any reason, we believe that there are a number of potential replacements, although we might incur some delay in identifying and qualifying such replacements. All of our product candidates are organic compounds of low molecular weight and are referred to as small molecules. We have selected these compounds based on their potential efficacy and safety, although they are also associated with reasonable cost of goods, ready availability of starting materials and ease of synthesis. We believe that the chemistry for ridinilazole is amenable to scale-up. We expect to continue to develop product candidates that can be produced cost-effectively at contract manufacturing facilities. Intellectual Property Our success depends in large part on our ability to obtain and maintain proprietary protection for our product candidates, technology and know-how, to operate without infringing the proprietary rights of others and to prevent others from infringing our proprietary rights. We strive to protect the proprietary technology that we believe is important to our business by, among other methods, seeking and maintaining patents, where available, that are intended to cover our product candidates, compositions and formulations, their methods of use and processes for their manufacture and any other inventions that are commercially important to the development of our business. We also rely on trade secrets, know-how, continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary and competitive position. As of December 31, 2021, we owned or exclusively licensed a total of 6 U.S. patents, 2 U.S. patent applications, 5 European patents and 4 European patent applications, including original filings, continuations and divisional applications, as well as numerous other foreign counterparts to these U.S. and European patents and patent applications. Our patent portfolio currently contains a total of 80 patents and patent applications. 17 Discuva Platform Technology. Our Discuva platform technology is currently protected by 12 U.S. and foreign patents, and two pending patent applications. We expect patent protection for this portfolio to expire in 2032. Ridinilazole Program . Our ridinilazole program is currently protected by 23 granted U.S. and foreign patents, with 3 pending patent applications. The patent portfolio directed to ridinilazole includes patents and patent applications directed to composition of matter, polymorphic forms, methods of manufacture and use, and formulation subject matter. We expect that our existing patents and patent applications (assuming the applications proceed to grant) will provide patent coverage for our ridinilazole program until 2042. SMT-738 Program . Our SMT738 program currently has 30 patent applications pending worldwide, directed to the composition of matter. We anticipate that our existing portfolio (assuming the applications proceed to grant) will provide patent coverage for our SMT738 program until 2042. Patent Term Extension . Patent term extensions are available in the U.S. and in some foreign countries, to compensate a patentee for patent term lost between patent grant and obtaining marketing approval by a regulatory agency, such as the FDA, for a product that is protected by the patent. In accordance with the patent term extension provision of the Drug Price Competition and Patent Term Restoration Act, better known as the “Hatch-Waxman Act”, an extension of time may be granted for one of Summit’s patents protecting ridinilazole, for example, which patent was granted several years before we may obtain marketing approval for the drug product. This extension may provide up to an additional five years of patent term. Similarly, patent extensions called supplementary protection certificates or “SPCs” may be obtained in some foreign countries for patents granted in advance of obtaining market authorization. SPCs may also provide up to an additional five years of patent term. Summit will submit applications for patent term extensions in all countries where such extensions are available to extend patent protection for ridinilazole, as well as for future patents granted that are directed to Summit’s other drug programs in development. The expiration dates referred to above are without regard to any potential patent term extension or other extension that may be available in the U.S. or any other market. Pediatric Exclusivity . Pediatric exclusivity is another type of marketing exclusivity in the U.S. that, if granted, provides for the attachment of an additional six months of marketing protection to the term of any existing regulatory exclusivity, as well as any patent term that is listed in the FDA “Orange Book” for the corresponding drug product. This six-month exclusivity may be granted if an NDA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data do not need to show the product to be effective in the pediatric population studied; rather if the pediatric clinical trial is deemed to fairly respond to the FDA’s request, and reports of the requested pediatric studies are submitted to and accepted by the FDA within the statutory time limits, the additional six months exclusivity is granted. A six-month pediatric extension of a SPC may also be obtained in some foreign countries, subject to carrying out an agreed pediatric investigation plan and compliance with other regulatory requirements of that country. Trade Secrets . In addition to patents, we rely on trade secrets and know-how to develop and maintain our competitive position. Trade secrets and know-how can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements and invention assignment agreements with our employees, consultants, scientific advisors, contractors and commercial partners. These agreements are designed to protect our proprietary information and, in the case of the invention assignment agreements, to grant us ownership of technologies that are developed through a relationship with a third-party. We also seek to preserve the integrity and confidentiality of our data, trade secrets and know-how by maintaining physical security of our premises and physical and electronic security of our information technology systems. Trademarks . Summit is in the process of selecting a name for our ridinilazole product, which we will pursue protection for as a trademark in the U.S. and foreign jurisdictions around the world. In connection with the development of our product pipeline, we will seek protection for marks we currently use and future marks when appropriate. We may not be able to obtain, maintain or protect the intellectual property rights necessary to conduct our business, and we may be subject to claims that we infringe or otherwise violate the intellectual property rights of third parties. For more information, please see the section on “Risk Factors – Risks Related to Intellectual Property.” Clinical Affairs We have robust engagements with nationally and internationally recognized key opinions leaders (“KOLs”) in research and clinical management of CDI. These KOLs are important in professional societies, peer education, and research and evidence generation, and are assisting us with educational initiatives and clinical development plans. We have a strong publication track record and anticipate multiple presentations at scientific conferences this year to establish ourselves as leaders in C. difficile and the gut microbiome. Sales, Marketing and Market Access At the present time, we in the process of evaluating the future path forward for our Phase III product candidate, including potential partnership opportunities. In light of this, we believe that our current capabilities with respect to building out a commercial team are adequate for ridinilazole and SMT-738. 18 Government Regulation As a biopharmaceutical company focused on the discovery, development, and commercialization of novel antibiotics for serious infectious diseases, we are subject to extensive and ongoing regulation by the FDA under the Federal Food, Drug, and Cosmetic Act and its implementing regulations, as well as other regulatory bodies in the United States and Europe. Government authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions, including the European Union, extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, packaging, storage, record keeping, labeling, pricing, reimbursement, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, and import and export of pharmaceutical products. The processes for obtaining regulatory approvals in the United States and in foreign countries and jurisdictions, along with compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources. Review and Approval of Drugs in the United States In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations. The failure to comply with the FDCA and applicable U.S. requirements at any time during the product development process, approval process or after approval may subject an applicant or sponsor to a variety of administrative or judicial sanctions, including refusal by the FDA to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and other types of letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, or civil or criminal investigations and penalties brought by the FDA and the Department of Justice, or DOJ, or other federal and state governmental entities. An applicant seeking approval to market and distribute a new drug product in the United States must typically undertake the following: • completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practice, or GLP, regulations; • submission to the FDA of an IND, which must take effect before human clinical trials may begin; • approval by an independent institutional review board, or IRB, representing each clinical site before each clinical trial may be initiated; • performance of adequate and well-controlled human clinical trials in accordance with current good clinical practices, or GCP, to establish the safety and efficacy of the proposed drug product for each indication; • preparation and submission to the FDA of a new drug application, or NDA; • review of the product candidate by an FDA advisory committee, where appropriate or if applicable; • satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or components thereof, are produced to assess compliance with current Good Manufacturing Practices, or cGMP, requirements and to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity; • satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data; • payment of user fees and securing FDA approval of the NDA; and • compliance with any post-approval requirements, including Risk Evaluation and Mitigation Strategies, or REMS, where applicable, and any post-approval studies required by the FDA. Preclinical Studies Before an applicant begins testing a compound with potential therapeutic value in humans, the product candidate enters the preclinical testing stage. Preclinical studies include laboratory evaluation of the purity and stability of the active pharmaceutical ingredient, or API, and the formulated drug or drug product, as well as in vitro and animal studies to assess the safety and activity of the drug for initial testing in humans and to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations. The results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among other things, are submitted to the FDA as part of an IND. Some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may continue after the IND is submitted. Companies usually must complete some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, and must also develop additional information about the chemistry and physical characteristics of the investigational product and finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the candidate product and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final product. Additionally, appropriate packaging must be selected and tested. Stability studies must be conducted to demonstrate that the candidate product does not undergo unacceptable deterioration over its shelf-life. The IND and IRB Processes 19 An IND is an exemption from the FDCA that allows an unapproved drug to be shipped in interstate commerce for use in an investigational clinical trial and a request for FDA authorization to administer an investigational drug to humans. Such authorization must be secured prior to interstate shipment and administration of any new drug that is not the subject of an approved NDA. In support of a request for an IND, applicants must submit a protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among other things, are submitted to the FDA as part of an IND. The FDA requires a 30-day waiting period after the filing of each IND before clinical trials may begin. This waiting period is designed to allow the FDA to review the IND to determine whether human research subjects will be exposed to unreasonable health risks. At any time during this 30-day period, the FDA may raise concerns or questions about the conduct of the trials as outlined in the IND and impose a clinical hold. In this case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can begin. Following commencement of a clinical trial under an IND, the FDA may also place a clinical hold or partial clinical hold on that trial. Clinical holds are imposed by the FDA whenever there is concern for patient safety and may be a result of new data, findings, or developments in clinical, nonclinical, and/or chemistry, manufacturing, and controls, or CMC. A clinical hold is an order issued by the FDA to the sponsor to delay a proposed clinical investigation or to suspend an ongoing investigation. A partial clinical hold is a delay or suspension of only part of the clinical work requested under the IND. For example, a specific protocol or part of a protocol is not allowed to proceed, while other protocols may do so. No more than 30 days after imposition of a clinical hold or partial clinical hold, the FDA will provide the sponsor a written explanation of the basis for the hold. Following issuance of a clinical hold or partial clinical hold, an investigation may only resume after the FDA has notified the sponsor that the investigation may proceed. The FDA will base that determination on information provided by the sponsor correcting the deficiencies previously cited or otherwise satisfying the FDA that the investigation can proceed. A sponsor may choose, but is not required, to conduct a foreign clinical study under an IND. When a foreign clinical study is conducted under an IND, all FDA IND requirements must be met unless waived. When the foreign clinical study is not conducted under an IND, the sponsor must ensure that the study complies with certain regulatory requirements of the FDA in order to use the study as support for an IND or application for marketing approval. Specifically, on April 28, 2008, the FDA amended its regulations governing the acceptance of foreign clinical studies not conducted under an investigational new drug application as support for an IND or a new drug application. The final rule provides that such studies must be conducted in accordance with good clinical practice, or GCP, including review and approval by an independent ethics committee, or IEC, and informed consent from subjects. The GCP requirements in the final rule encompass both ethical and data integrity standards for clinical studies. The FDA’s regulations are intended to help ensure the protection of human subjects enrolled in non-IND foreign clinical studies, as well as the quality and integrity of the resulting data. They further help ensure that non-IND foreign studies are conducted in a manner comparable to that required for IND studies. In addition to the foregoing IND requirements, an IRB representing each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct continuing review and reapprove the study at least annually. The IRB must review and approve, among other things, the study protocol and informed consent information to be provided to study subjects. An IRB must operate in compliance with FDA regulations. An IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the product candidate has been associated with unexpected serious harm to patients. Additionally, some trials are overseen by an independent group of qualified experts organized by the trial sponsor, known as a data safety monitoring board or committee. This group provides authorization for whether or not a trial may move forward at designated check points based on access that only the group maintains to available data from the study. Suspension or termination of development during any phase of clinical trials can occur if it is determined that the participants or patients are being exposed to an unacceptable health risk. Other reasons for suspension or termination may be made by us based on evolving business objectives and/or competitive climate. Information about clinical trials must be submitted within specific timeframes to the National Institutes of Health, or NIH, for public dissemination on its ClinicalTrials.gov website. Similar requirements for posting clinical trial information are present in the European Union (EudraCT) website: https://eudract.ema.europa.eu/ and other countries, as well. Expanded Access to an Investigational Drug for Treatment Use Expanded access, sometimes called “compassionate use,” is the use of investigational new drug products outside of clinical trials to treat patients with serious or immediately life-threatening diseases or conditions when there are no comparable or satisfactory alternative treatment options. The rules and regulations related to expanded access are intended to improve access to investigational drugs for patients who may benefit from investigational therapies. FDA regulations allow access to investigational drugs under an IND by the company or the treating physician for treatment purposes on a case-by-case basis for: individual patients (single-patient IND applications for treatment in emergency settings and non-emergency settings); intermediate-size patient populations; and larger populations for use of the drug under a treatment protocol or Treatment IND Application. 20 When considering an IND application for expanded access to an investigational product with the purpose of treating a patient or a group of patients, the sponsor and treating physicians or investigators will determine suitability when all of the following criteria apply: patient(s) have a serious or immediately life-threatening disease or condition, and there is no comparable or satisfactory alternative therapy to diagnose, monitor, or treat the disease or condition; the potential patient benefit justifies the potential risks of the treatment and the potential risks are not unreasonable in the context or condition to be treated; and the expanded use of the investigational drug for the requested treatment will not interfere with initiation, conduct, or completion of clinical investigations that could support marketing approval of the product or otherwise compromise the potential development of the product. On December 13, 2016, the 21st Century Cures Act established (and the 2017 Food and Drug Administration Reauthorization Act later amended) a requirement that sponsors of one or more investigational drugs for the treatment of a serious disease(s) or condition(s) make publicly available their policy for evaluating and responding to requests for expanded access for individual patients. Although these requirements were rolled out over time, they have now come into full effect. This provision requires drug and biologic companies to make publicly available their policies for expanded access for individual patient access to products intended for serious diseases. Sponsors are required to make such policies publicly available upon the earlier of initiation of a Phase II or Phase III study; or 15 days after the drug or biologic receives designation as a breakthrough therapy, fast track product, or regenerative medicine advanced therapy. Running clinical trials that can support regulatory approvals is the best way to ultimately ensure wide access for patients to our product candidates. At this point in the development, we cannot support any use of our product candidates outside of our clinical trials. In addition, on May 30, 2018, the Right to Try Act, was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational new drug products that have completed a Phase I clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no obligation for a drug manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act, but the manufacturer must develop an internal policy and respond to patient requests according to that policy. Human Clinical Trials in Support of an NDA Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writing before their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, the inclusion and exclusion criteria, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined: Phase I . The investigational drug is initially introduced into healthy human subjects or, in certain indications such as cancer, patients with the target disease or condition and tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness and to determine optimal dosage. Phase II . The investigational drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage. Phase III . The investigational drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product, and to provide adequate information for the labeling of the product. These clinical trials are commonly referred to as “pivotal” studies, which denotes a study that presents the data that the FDA or other relevant regulatory agency will use to determine the primary basis of whether or not to approve a product candidate. Progress reports of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. In addition, IND safety reports must be submitted to the FDA for any of the following: serious and unexpected suspected adverse reactions; findings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the drug; and any clinically important increase in the case of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. Phase I, Phase II and Phase III clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. The FDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted. Concurrent with clinical trials, companies often complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug as well as finalize a process for manufacturing the 21 product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality, purity, and potency of the final drug. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life. Under the Pediatric Research Equity Act ("PREA") of 2003, an NDA or supplement thereto must contain data that are adequate to assess the safety and effectiveness of the drug product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. With enactment of the Food and Drug Administration Safety and Innovation Act, or FDASIA, in 2012, sponsors must also submit pediatric study plans prior to the assessment data. Those plans must contain an outline of the proposed pediatric study or studies the applicant plans to conduct, including study objectives and design, any deferral or waiver requests and other information required by regulation. The applicant, the FDA, and the FDA’s internal review committee must then review the information submitted, consult with each other, and agree upon a final plan. The FDA or the applicant may request an amendment to the plan at any time. For drugs intended to treat a serious or life-threatening disease or condition, FDA is to provide sponsors with its best judgment on whether pediatric studies would be required and whether their submission would be deferred until after approval. This input is to be given by the FDA at the end-of-phase I meeting, for drugs for life-threatening diseases, and at the end-of-phase II meeting, for other drugs. A sponsor must submit an initial pediatric study plan, if required under PREA, no later than either 60 calendar days after the date of the end-of-phase II meeting or such other time as agreed upon between FDA and the sponsor. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. Additional requirements and procedures relating to deferral requests and requests for extension of deferrals are contained in FDASIA. Unless otherwise required by regulation, the pediatric data requirements do not apply to products with orphan designation. The FDA Reauthorization Act of 2017 established new requirements to govern certain molecularly targeted cancer indications. Any company that submits an NDA three years after the date of enactment of that statute must submit pediatric assessments with the NDA if the drug is intended for the treatment of an adult cancer and is directed at a molecular target that the FDA determines to be substantially relevant to the growth or progression of a pediatric cancer. The investigation must be designed to yield clinically meaningful pediatric study data regarding the dosing, safety and preliminary efficacy to inform pediatric labeling for the product. Submission of an NDA to the FDA Assuming successful completion of required clinical testing and other requirements, the results of the preclinical studies and clinical trials, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the drug product for one or more indications. Under federal law, the submission of most NDAs is subject to an application user fee, which for federal fiscal year 2022 is $3,117,218 for an application requiring clinical data. The sponsor of the approved NDA is also subject to an annual program fee, which for the fiscal year 2022 is $369,413. Certain exceptions and waivers are available for some of these fees, such as an exception from the application fee for products with orphan designation and a waiver for certain small businesses. Following submission of an application, the FDA conducts a filing review of an NDA within 60 calendar days of its receipt and strives to inform the sponsor by the 74th day after the FDA’s receipt of the submission whether the application is sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA has agreed to certain performance goals in the review process of NDAs. Under that agreement, 90% of applications seeking approval of new molecular entities, or NMEs, are meant to be reviewed within ten months from the date on which FDA accepts the NDA for filing, and 90% of applications for NMEs that have been designated for “priority review” are meant to be reviewed within six months of the filing date. For applications seeking approval of drugs that are not NMEs, the ten-month and six-month review periods run from the date that FDA receives the application. The review process may be extended by the FDA for three additional months to consider new information or clarification provided by the applicant to address an outstanding deficiency identified by the FDA following the original submission. Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is or will be manufactured. These pre-approval inspections cover all facilities associated with an NDA submission, including drug component manufacturing (such as active pharmaceutical ingredients), finished drug product manufacturing, and control testing laboratories. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. Under the FDA Reauthorization Act of 2017, the FDA must implement a protocol to expedite review of responses to 22 inspection reports pertaining to certain applications, including applications for products in shortage or those for which approval is dependent on remediation of conditions identified in the inspection report. In addition, as a condition of approval, the FDA may require an applicant to develop a REMS. REMS use risk minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the FDA will consider the size of the population likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness of known or potential adverse events, and whether the product is a new molecular entity. REMS can include medication guides, physician communication plans for healthcare professionals, and elements to assure safe use, or ETASU. ETASU may include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The FDA may require a REMS before approval or post-approval if it becomes aware of a serious risk associated with use of the product. The requirement for a REMS can materially affect the potential market and profitability of a product. The FDA may refer an application for a drug to an advisory committee or explain why such referral was not made. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions. Fast Track, Breakthrough Therapy, Priority Review and Regenerative Advanced Therapy Designations The FDA is authorized to designate certain products for expedited review if they are intended to address an unmet medical need in the treatment of a serious or life-threatening disease or condition. These programs are referred to as fast-track designation, breakthrough therapy designation, priority review designation and regenerative advanced therapy designation. Specifically, the FDA may designate a product for fast-track review if it is intended, whether alone or in combination with one or more other products, for the treatment of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical needs for such a disease or condition. For fast-track products, sponsors may have greater interactions with the FDA, and the FDA may initiate review of sections of a fast-track product’s application before the application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a fast-track product may be effective. The sponsor must also provide, and the FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay applicable user fees. However, the FDA’s time period goal for reviewing a fast-track application does not begin until the last section of the application is submitted. In addition, the fast-track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process. Second, a product may be designated as a breakthrough therapy if it is intended, either alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The FDA may take certain actions with respect to breakthrough therapies, including holding meetings with the sponsor throughout the development process; providing timely advice to the product sponsor regarding development and approval; involving more senior staff in the review process; assigning a cross-disciplinary project lead for the review team; and taking other steps to design the clinical trials in an efficient manner. Third, the FDA may designate a product for priority review if it is a product that treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness. The FDA determines, on a case-by-case basis, whether the proposed product represents a significant improvement when compared with other available therapies. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting product reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, and evidence of safety and effectiveness in a new subpopulation. A priority designation is intended to direct overall attention and resources to the evaluation of such applications, and to shorten the FDA’s goal for taking action on a marketing application from ten months to six months. Finally, with passage of the 21st Century Cures Act, or Cures Act, in December 2016, Congress authorized the FDA to accelerate review and approval of antibacterial products via the limited-population antibacterial drug (LPAD) pathway. The LPAD pathway provides a unique mechanism for the Food and Drug Administration to review and approve new antibacterial drugs that address unmet medical needs for specific, limited populations of patients - those with serious and life-threatening bacterial infections that are resistant to current treatments. This targeted approach would make antibiotic development more feasible by allowing for smaller clinical development programs that are focused on the limited, high-risk populations that would use these new antibiotics, instead of on more general populations that can be treated with existing medicines. LPAD would also make antibiotic development more feasible by enabling FDA to assess these drugs based on the unique balance of benefits they offer vs. risks they present to the limited number of patients they are intended to treat - specifically, patients who have few or no other treatment options. Product candidates that qualify for LPAD review may simultaneously qualify for one or more of FDA’s expedited review programs. 23 Accelerated Approval Pathway The FDA may grant accelerated approval to a drug for a serious or life-threatening condition that provides meaningful therapeutic advantage to patients over existing treatments based upon a determination that the drug has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA may also grant accelerated approval for such a drug when the product has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality, or IMM, and that is reasonably likely to predict an effect on IMM or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Drugs granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditional approval. For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. An intermediate clinical endpoint is a measurement of a therapeutic effect that is considered reasonably likely to predict the clinical benefit of a drug, such as an effect on IMM. The FDA has limited experience with accelerated approvals based on intermediate clinical endpoints, but has indicated that such endpoints generally may support accelerated approval where the therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a basis for concluding that the therapeutic effect is reasonably likely to predict the ultimate clinical benefit of a drug. The accelerated approval pathway is most often used in settings in which the course of a disease is long and an extended period of time is required to measure the intended clinical benefit of a drug, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. For example, accelerated approval has been used extensively in the development and approval of drugs for treatment of a variety of cancers in which the goal of therapy is generally to improve survival or decrease morbidity and the duration of the typical disease course requires lengthy and sometimes large clinical trials to demonstrate a clinical or survival benefit. The accelerated approval pathway is usually contingent on a sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the drug’s clinical benefit. As a result, a product candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase IV or post-approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, would allow the FDA to withdraw the drug from the market on an expedited basis. All promotional materials for product candidates approved under accelerated regulations are subject to prior review by the FDA. Limited Population Antibacterial Drug Pathway With passage of the Cures Act, Congress authorized the FDA to approve an antibacterial or antifungal drug, alone or in combination with one or more other drugs, as a “limited population drug.” To qualify for this approval pathway, the drug must be intended to treat a serious or life-threatening infection in a limited population of patients with unmet needs; the standards for approval of drugs and biologics under the FDCA and the Public Health Service Act, or PHSA, must be satisfied; and the FDA must receive a written request from the sponsor to approve the drug as a limited population drug pursuant to this provision. The FDA’s determination of safety and effectiveness for such a product must reflect the benefit-risk profile of such drug in the intended limited population, taking into account the severity, rarity, or prevalence of the infection the drug is intended to treat and the availability or lack of alternative treatment in such a limited population. Any drug or biologic approved under this pathway must be labeled with the statement “Limited Population” in a prominent manner and adjacent to the proprietary name of the drug or biological product. The prescribing information must also state that the drug is indicated for use in a limited and specific population of patients and copies of all promotional materials relating to the drug must be submitted to the FDA at least 30 days prior to dissemination of the materials. If the FDA subsequently approves the drug for a broader indication, the agency may remove any post-marketing conditions, including requirements with respect to labeling and review of promotional materials applicable to the product. Nothing in this pathway to approval of a limited population drug prevents sponsors of such products from seeking designation or approval under other provisions of the FDCA, such as accelerated approval. The FDA’s Decision on an NDA On the basis of the FDA’s evaluation of the NDA and accompanying information, including the results of the inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval. If the FDA approves a product, it may limit the approved indications for use for the product, require that contraindications, warnings or precautions be included in the product labeling, require that post-approval studies, including Phase IV clinical 24 trials, be conducted to further assess the drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, including REMS, which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post-market studies or surveillance programs. After approval, many types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval. Post-Approval Requirements Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to record keeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual program fee requirements for any marketed products, as well as new application fees for supplemental applications with clinical data. The FDA may impose a number of post-approval requirements as a condition of approval of an NDA. For example, the FDA may require post-marketing testing, including clinical trials, and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization. In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies. The drug manufacturers are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third- party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP compliance. Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things: • restrictions on the marketing or manufacturing of the product, suspension of the approval, complete withdrawal of the product from the market or product recalls; • fines, warning letters or holds on post-approval clinical trials; • refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product license approvals; • product seizure or detention, or refusal to permit the import or export of products; or • injunctions or the imposition of civil or criminal penalties. The FDA strictly regulates the marketing, labeling, advertising and promotion of prescription drug products placed on the market. Regulation includes, among other things, standards and regulations for direct-to-consumer advertising, communications regarding unapproved uses, industry-sponsored scientific and educational activities, and promotional activities involving the Internet and social media. Promotional claims about a drug’s safety or effectiveness are prohibited before the drug is approved. After approval, a drug product generally may not be promoted for uses that are not approved by the FDA, as reflected in the product’s prescribing information. In the United States, health care professionals are generally permitted to prescribe drugs for such uses not described in the drug’s labeling, known as off-label uses, because the FDA does not regulate the practice of medicine. However, FDA regulations impose rigorous restrictions on manufacturers’ communications, prohibiting the promotion of off-label uses. It may be permissible, under very specific, narrow conditions, for a manufacturer to engage in nonpromotional, non-misleading communication regarding off-label information, such as distributing scientific or medical journal information. If a company is found to have promoted off-label uses, it may become subject to adverse public relations and administrative and judicial enforcement by the FDA, the Department of Justice, or the Office of the Inspector General of the Department of Health and Human Services, as well as state authorities. This could subject a company to a range of penalties that could have a significant commercial impact, including civil and criminal fines and agreements that materially restrict the manner in which a company promotes or distributes drug products. The federal government has levied large civil and criminal fines against companies for alleged improper promotion, and has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, and its implementing regulations, as well as the Drug Supply Chain Security Act, or DSCSA, which regulate the distribution and tracing of prescription drug samples at the federal level, and set minimum standards for the regulation of distributors by the states. The PDMA, its implementing regulations and state laws limit the distribution of prescription 25 pharmaceutical product samples, and the DSCSA imposes requirements to ensure accountability in distribution and to identify and remove counterfeit and other illegitimate products from the market. Pediatric Exclusivity Pediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted, provides for the attachment of an additional six months of marketing protection to the term of any existing regulatory exclusivity, including the non-patent and orphan exclusivity. This six-month exclusivity may be granted if an NDA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by the FDA within the statutory time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover the product are extended by six months. This is not a patent term extension, but it effectively extends the regulatory period during which the FDA cannot approve another application. GAIN Exclusivity for Antibiotics In July 2015, the FDA has designated ridinilazole as a qualified infectious disease product, or “QIDP”, under the Generating Antibiotic Incentives Now Act, or GAIN Act. In 2019, the Centers for Disease Control and Prevention of the U.S. Department of Health and Human Services, or CDC, published an update of its 2013 report reviewing antibiotic resistance threats to the United States. This updated report continued to highlight that CDI poses an immediate public health threat that requires urgent and aggressive action, and C. difficile is one of four bacterial pathogens with this urgent threat status. Congress passed this legislation to encourage the development of antibacterial and antifungal drug products that treat pathogens that cause serious and life-threatening infections. To that end, the GAIN Act grants an additional five years of exclusivity upon the approval of an NDA for a drug product designated by the FDA as a QIDP. Thus, for a QIDP, the periods of five-year new chemical entity exclusivity, three-year new clinical investigation exclusivity and seven-year orphan drug exclusivity, would become ten years, eight years and 12 years, respectively. A QIDP is defined in the GAIN Act to mean “an antibacterial or antifungal drug for human use intended to treat serious or life- threatening infections, including those caused by: (1) an antibacterial or antifungal resistant pathogen, including novel or emerging infectious pathogens;” or (2) certain “qualifying pathogens.” A “qualifying pathogen” is a pathogen that has the potential to pose a serious threat to public health (such as resistant Gram-positive pathogens, multi-drug resistant Gram- negative bacteria, multi-drug resistant tuberculosis and Clostridioides difficile ) and that is included in a list established and maintained by the FDA. A drug sponsor may request the FDA to designate its product as a QIDP any time before the submission of an NDA. The FDA must make a QIDP determination within 60 days of the designation request. A product designated as a QIDP will be granted priority review by FDA and can qualify for “fast track” status. The additional five years of exclusivity under the GAIN Act for drug products designated by the FDA as QIDPs applies only to a drug that is first approved on or after July 9, 2012. Additionally, the five year exclusivity extension does not apply to: a supplement to an application under FDCA Section 505(b) for any QIDP for which an extension is in effect or has expired; a subsequent application filed with respect to a product approved by the FDA for a change that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device or strength; or a product that does not meet the definition of a QIDP under Section 505(g) based upon its approved uses. Patent Term Restoration and Extension The term of a U.S. patent that covers a drug, biological product or medical device approved pursuant to a PMA may also be eligible for patent term extension when FDA approval is granted, provided that certain statutory and regulatory requirements are met. The length of the patent term extension is related to the length of time the drug is under regulatory review while the patent is in force. The Hatch-Waxman Act permits a patent term extension of up to five years beyond the expiration date set for the patent. Patent extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent applicable to each regulatory review period may be granted an extension and only those claims reading on the approved drug may be extended. Similar provisions are available in Europe and certain other foreign jurisdictions to extend the term of a patent that covers an approved drug, provided that statutory and regulatory requirements are met. The USPTO reviews and approves the application for any patent term extension or restoration in consultation with the FDA. Regulation Outside the United States In order to market any product outside of the United States, a company must also comply with numerous and varying regulatory requirements of other countries and jurisdictions regarding quality, safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of drug products. Whether or not it obtains FDA approval for a product, the company would need to obtain the necessary approvals by the comparable foreign regulatory authorities before it can commence clinical trials or marketing of the product in those countries or jurisdictions. The approval process ultimately varies between countries and jurisdictions and can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries and jurisdictions might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction does not ensure 26 regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatory process in others. Regulation and Marketing Authorization in the European Union Clinical Trial Approval The Clinical Trials Directive 2001/20/EC, the Directive 2005/28/EC on Good Clinical Practice, or GCP, and the related national implementing provisions of the individual E.U. Member States govern the system for the approval of clinical trials in the European Union. Under this system, an applicant must obtain prior approval from the competent national authority of the E.U. Member States in which the clinical trial is to be conducted. Furthermore, the applicant may only start a clinical trial at a specific study site after the competent ethics committee has issued a favorable opinion. The clinical trial application must be accompanied by, among other documents, an investigational medicinal product dossier (the Common Technical Document) with supporting information prescribed by Directive 2001/20/EC, Directive 2005/28/EC, where relevant the implementing national provisions of the individual E.U. Member States and further detailed in applicable guidance documents. In April 2014, the new Clinical Trials Regulation, (E.U.) No 536/2014 (Clinical Trials Regulation) was adopted. The Regulation was published on June 16, 2014, but has not yet become effective. The Clinical Trials Regulation will be directly applicable in all the E.U. Member States, repealing the current Clinical Trials Directive 2001/20/EC and replacing any national legislation that was put in place to implement the Directive. Conduct of all clinical trials performed in the European Union will continue to be bound by currently applicable provisions until the new Clinical Trials Regulation becomes applicable. The extent to which ongoing clinical trials will be governed by the Clinical Trials Regulation will depend on when the Clinical Trials Regulation becomes applicable and on the duration of the individual clinical trial. If a clinical trial continues for more than three years from the day on which the Clinical Trials Regulation becomes applicable the Clinical Trials Regulation will at that time begin to apply to the clinical trial. The new Clinical Trials Regulation aims to simplify and streamline the approval of clinical trials in the European Union. The main characteristics of the regulation include: a streamlined application procedure via a single entry point, the “E.U. Portal and Database;” a single set of documents to be prepared and submitted for the application as well as simplified reporting procedures for clinical trial sponsors; and a harmonized procedure for the assessment of applications for clinical trials, which is divided in two parts. Part I is assessed by the appointed reporting Member State, whose assessment report is submitted for review by the sponsor and all other competent authorities of all E.U. Member States in which an application for authorization of a clinical trial has been submitted (Concerned Member States). Part II is assessed separately by each Concerned Member State. Strict deadlines have been established for the assessment of clinical trial applications. The role of the relevant ethics committees in the assessment procedure will continue to be governed by the national law of the Concerned Member State. However, overall related timelines will be defined by the Clinical Trials Regulation. As of January 1, 2020, the website of the European Commission reported that the implementation of the new Clinical Trials Regulation ("CTR") was dependent on the development of a fully functional clinical trials portal and database, which would be confirmed by an independent audit, and that the new legislation would come into effect six months after the European Commission publishes a notice of this confirmation. The website indicated that the audit was expected to commence in December 2020. The European Commission published a notice in the Official Journal of the European Union on July 31, 2021 confirming January 31, 2022 as the date of entry into application of the Clinical Trials Regulation and the go-live of its Clinical Trials Information System (“CTIS”). As in the United States, similar requirements for posting clinical trial information are present in the European Union (EudraCT) website: https://eudract.ema.europa.eu/ and other countries. Marketing Authorization To obtain a marketing authorization for a product under E.U. regulatory systems, an applicant must submit an MAA either under a centralized procedure administered by the EMA, or one of the procedures administered by competent authorities in the E.U. Member States (decentralized procedure, national procedure or mutual recognition procedure). A marketing authorization may be granted only to an applicant established in the E.U. Regulation (EC) No 1901/2006 provides that prior to obtaining a marketing authorization in the European Union, applicants have to demonstrate compliance with all measures included in an EMA-approved Paediatric Investigation Plan, or PIP, covering all subsets of the pediatric population, unless the EMA has granted (1) a product-specific waiver, (2) a class waiver or (3) a deferral for one or more of the measures included in the PIP. The centralized procedure provides for the grant of a single marketing authorization by the European Commission that is valid across the European Economic Area (i.e., the European Union as well as Iceland, Liechtenstein and Norway). Pursuant to Regulation (EC) No 726/2004, the centralized procedure is compulsory for specific products, including for medicines produced by certain biotechnological processes, products designated as orphan medicinal products, ATMPs and products with a new active substance indicated for the treatment of certain diseases, including products for the treatment of cancer. For products with a new active substance indicated for the treatment of other diseases and products that are highly innovative or for which a centralized process is in the interest of patients, the centralized procedure may be optional. The centralized procedure may at the 27 request of the applicant also be used in certain other cases. We anticipate that the centralized procedure will be mandatory for the product candidates we are developing. Under the centralized procedure, the CHMP is also responsible for several post-authorization and maintenance activities, such as the assessment of modifications or extensions to an existing marketing authorization. Under the centralized procedure in the European Union, the maximum timeframe for the evaluation of an MAA is 210 days, excluding clock stops, when additional information or written or oral explanation is to be provided by the applicant in response to questions of the CHMP. Accelerated evaluation might be granted by the CHMP in exceptional cases, when a medicinal product is of major interest from the point of view of public health and in particular from the viewpoint of therapeutic innovation. If the CHMP accepts such request, the time limit of 210 days will be reduced to 150 days, but it is possible that the CHMP can revert to the standard time limit for the centralized procedure if it considers that it is no longer appropriate to conduct an accelerated assessment. At the end of this period, the CHMP provides a scientific opinion on whether or not a marketing authorization should be granted in relation to a medicinal product. Within 15 calendar days of receipt of a final opinion from the CHMP, the European Commission must prepare a draft decision concerning an application for marketing authorization. This draft decision must take the opinion and any relevant provisions of E.U. law into account. Before arriving at a final decision on an application for centralized authorization of a medicinal product the European Commission must consult the Standing Committee on Medicinal Products for Human Use. The Standing Committee is composed of representatives of the E.U. Member States and chaired by a non- voting European Commission representative. The European Parliament also has a related “droit de regard.” The European Parliament's role is to ensure that the European Commission has not exceeded its powers in deciding to grant or refuse to grant a marketing authorization. The European Commission may grant a so-called “marketing authorization under exceptional circumstances.” Such authorization is intended for products for which the applicant can demonstrate that it is unable to provide comprehensive data on the efficacy and safety under normal conditions of use, because the indications for which the product in question is intended are encountered so rarely that the applicant cannot reasonably be expected to provide comprehensive evidence, or in the present state of scientific knowledge, comprehensive information cannot be provided, or it would be contrary to generally accepted principles of medical ethics to collect such information. Consequently, marketing authorization under exceptional circumstances may be granted subject to certain specific obligations, which may include the following: • the applicant must complete an identified program of studies within a time period specified by the competent authority, the results of which form the basis of a reassessment of the benefit/risk profile; • the medicinal product in question may be supplied on medical prescription only and may in certain cases be administered only under strict medical supervision, possibly in a hospital and in the case of a radiopharmaceutical, by an authorized person; and • the package leaflet and any medical information must draw the attention of the medical practitioner to the fact that the particulars available concerning the medicinal product in question are as yet inadequate in certain specified respects. A marketing authorization under exceptional circumstances is subject to annual review to reassess the risk-benefit balance in an annual reassessment procedure. Continuation of the authorization is linked to the annual reassessment and a negative assessment could potentially result in the marketing authorization being suspended or revoked. The renewal of a marketing authorization of a medicinal product under exceptional circumstances, however, follows the same rules as a “normal” marketing authorization. Thus, a marketing authorization under exceptional circumstances is granted for an initial five years, after which the authorization will become valid indefinitely, unless the EMA decides that safety grounds merit one additional five-year renewal. The European Commission may also grant a so-called “conditional marketing authorization” prior to obtaining the comprehensive clinical data required for an application for a full marketing authorization. Such conditional marketing authorizations may be granted for product candidates (including medicines designated as orphan medicinal products), if (i) the risk-benefit balance of the product candidate is positive, (ii) it is likely that the applicant will be in a position to provide the required comprehensive clinical trial data, (iii) the product fulfills an unmet medical need and (iv) the benefit to public health of the immediate availability on the market of the medicinal product concerned outweighs the risk inherent in the fact that additional data are still required. A conditional marketing authorization may contain specific obligations to be fulfilled by the marketing authorization holder, including obligations with respect to the completion of ongoing or new studies, and with respect to the collection of pharmacovigilance data. Conditional marketing authorizations are valid for one year, and may be renewed annually, if the risk-benefit balance remains positive, and after an assessment of the need for additional or modified conditions and/or specific obligations. The timelines for the centralized procedure described above also apply with respect to the review by the CHMP of applications for a conditional marketing authorization. The E.U. medicines rules expressly permit the E.U. Member States to adopt national legislation prohibiting or restricting the sale, supply or use of any medicinal product containing, consisting of or derived from a specific type of human or animal cell, such as embryonic stem cells. While the products we have in development do not make use of embryonic stem cells, it is possible that the national laws in certain E.U. Member States may prohibit or restrict us from commercializing our products, even if they have been granted an E.U. marketing authorization. Unlike the centralized authorization procedure, the decentralized marketing authorization procedure requires a separate application to, and leads to separate approval by, the competent authorities of each E.U. Member State in which the product is to be marketed. This application is identical to the application that would be submitted to the EMA for authorization through the 28 centralized procedure. The referenced E.U. Member State prepares a draft assessment and drafts of the related materials within 120 days after receipt of a valid application. The resulting assessment report is submitted to the concerned E.U. Member States who, within 90 days of receipt, must decide whether to approve the assessment report and related materials. If a concerned E.U. Member State cannot approve the assessment report and related materials due to concerns relating to a potential serious risk to public health, disputed elements may be referred to the European Commission, whose decision is binding on all E.U. Member States. The mutual recognition procedure similarly is based on the acceptance by the competent authorities of the E.U. Member States of the marketing authorization of a medicinal product by the competent authorities of other E.U. Member States. The holder of a national marketing authorization may submit an application to the competent authority of an E.U. Member State requesting that this authority recognize the marketing authorization delivered by the competent authority of another E.U. Member State. Regulatory Data Protection in the European Union In the European Union, innovative medicinal products approved on the basis of a complete independent data package qualify for eight years of data exclusivity upon marketing authorization and an additional two years of market exclusivity pursuant to Directive 2001/83/EC. Regulation (EC) No 726/2004 repeats this entitlement for medicinal products authorized in accordance to the centralized authorization procedure. Data exclusivity prevents applicants for authorization of generics of these innovative products from referencing the innovator’s data to assess a generic (abridged) application for a period of eight years. During an additional two-year period of market exclusivity, a generic marketing authorization application can be submitted and authorized, and the innovator’s data may be referenced, but no generic medicinal product can be placed on the E.U. market until the expiration of the market exclusivity. The overall ten-year period will be extended to a maximum of 11 years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies. Even if a compound is considered to be a new chemical entity so that the innovator gains the prescribed period of data exclusivity, another company nevertheless could also market another version of the product if such company obtained marketing authorization based on an MAA with a complete independent data package of pharmaceutical tests, preclinical tests and clinical trials. Periods of Authorization and Renewals A marketing authorization has an initial validity for five years in principle. The marketing authorization may be renewed after five years on the basis of a re-evaluation of the risk-benefit balance by the EMA or by the competent authority of the E.U. Member State. To this end, the marketing authorization holder must provide the EMA or the competent authority with a consolidated version of the file in respect of quality, safety and efficacy, including all variations introduced since the marketing authorization was granted, at least six months before the marketing authorization ceases to be valid. The European Commission or the competent authorities of the E.U. Member States decide on justified grounds relating to pharmacovigilance, to proceed with one further five-year period of marketing authorization. Once subsequently definitively renewed, the marketing authorization shall be valid for an unlimited period. Any authorization which is not followed by the actual placing of the medicinal product on the E.U. market (in case of centralized procedure) or on the market of the authorizing E.U. Member State within three years after authorization ceases to be valid (the so-called sunset clause). Pediatric Studies Prior to obtaining a marketing authorization in the European Union, applicants have to demonstrate compliance with all measures included in an EMA-approved Paediatric Investigation Plan, or PIP, covering all subsets of the pediatric population, unless the EMA has granted a product-specific waiver, a class waiver, or a deferral for one or more of the measures included in the PIP. The respective requirements for all marketing authorization procedures are set forth in Regulation (EC) No 1901/2006, which is referred to as the Paediatric Regulation. This requirement also applies when a company wants to add a new indication, pharmaceutical form or route of administration for a medicine that is already authorized. The Paediatric Committee of the EMA, or PDCO, may grant deferrals for some medicines, allowing a company to delay development of the medicine in children until there is enough information to demonstrate its effectiveness and safety in adults. The PDCO may also grant waivers when development of a medicine in children is not needed or is not appropriate, such as for diseases that only affect the elderly population. Before a marketing authorization application can be filed, or an existing marketing authorization can be amended, the EMA determines that companies actually comply with the agreed studies and measures listed in each relevant PIP. Regulatory Requirements after a Marketing Authorization has been Obtained In case an authorization for a medicinal product in the European Union is obtained, the holder of the marketing authorization is required to comply with a range of requirements applicable to the manufacturing, marketing, promotion and sale of medicinal products. These include: • Compliance with the European Union’s stringent pharmacovigilance or safety reporting rules must be ensured. These rules can impose post-authorization studies and additional monitoring obligations. 29 • The manufacturing of authorized medicinal products, for which a separate manufacturer’s license is mandatory, must also be conducted in strict compliance with the applicable E.U. laws, regulations and guidance, including Directive 2001/83/EC, Directive 2003/94/EC, Regulation (EC) No 726/2004 and the European Commission Guidelines for Good Manufacturing Practice. These requirements include compliance with E.U. cGMP standards when manufacturing medicinal products and active pharmaceutical ingredients, including the manufacture of active pharmaceutical ingredients outside of the European Union with the intention to import the active pharmaceutical ingredients into the European Union. • The marketing and promotion of authorized drugs, including industry-sponsored continuing medical education and advertising directed toward the prescribers of drugs and/or the general public, are strictly regulated in the European Union notably under Directive 2001/83EC, as amended, and E.U. Member State laws. Direct-to- consumer advertising of prescription medicines is prohibited across the European Union. Brexit and the Regulatory Framework in the United Kingdom 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. We expect to be subject to additional and potentially duplicative regulatory requirements due to the withdrawal of the United Kingdom from the European Union, including requirements relevant to receiving marketing approval for ridinilazole. However there remains substantial uncertainty related to the implementation of the trade and cooperation agreement and the application of its terms. General Data Protection Regulation The collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the European Union, including personal health data, is subject to the E.U. General Data Protection Regulation (GDPR), which became effective on May 25, 2018. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when engaging third-party processors. The GDPR also imposes strict rules on the transfer of personal data to countries outside the European Union, including the U.S., and permits data protection authorities to impose large penalties for violations of the GDPR, including potential fines of up to €20 million or 4% of annual global revenues, whichever is greater. 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 resulting from violations of the GDPR. Compliance with the GDPR will be a rigorous and time-intensive process that may increase the cost of doing business or require companies to change their business practices to ensure full compliance. Pricing Decisions for Approved Products In the European Union, pricing and reimbursement schemes vary widely from country to country. Some countries provide that products may be marketed only after a reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost-effectiveness of a particular product candidate to currently available therapies or so- called health technology assessments in order to obtain reimbursement or pricing approval. For example, the European Union provides options for its Member States to restrict the range of products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. Member States may approve a specific price for a product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the product on the market. Other Member States allow companies to fix their own prices for products, but monitor and control prescription volumes and issue guidance to physicians to limit prescriptions. Recently, many countries in the European Union have increased the amount of discounts required on pharmaceuticals and these efforts could continue as countries attempt to manage health care expenditures, especially in light of the severe fiscal and debt crises experienced by many countries in the European Union. The downward pressure on health care costs in general, particularly prescription products, has become intense. As a result, increasingly high barriers are being erected to the entry of new products. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various Member States, and parallel trade, i.e., arbitrage between low-priced and high- priced Member States, can further reduce prices. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any products, if approved in those countries. 30 Patent Term Extension In order to compensate the patentee for delays in obtaining a marketing authorization for a patented product, a supplementary certificate, or SPC, may be granted extending the exclusivity period for that specific product by up to five years. Applications for SPCs must be made to the relevant patent office in each E.U. member state and the granted certificates are valid only in the member state of grant. An application has to be made by the patent owner within six months of the first marketing authorization being granted in the European Union (assuming the patent in question has not expired, lapsed or been revoked) or within six months of the grant of the patent (if the marketing authorization is granted first). In the context of SPCs, the term “product” means the active ingredient or combination of active ingredients for a medicinal product and the term “patent” means a patent protecting such a product or a new manufacturing process or application for it. The duration of an SPC is calculated as the difference between the patent’s filing date and the date of the first marketing authorization, minus five years, subject to a maximum term of five years. A six month pediatric extension of an SPC may be obtained where the patentee has carried out an agreed pediatric investigation plan, the authorized product information includes information on the results of the studies and the product is authorized in all member states of the European Union. Healthcare Law and Regulation Health care providers and third-party payors play a primary role in the recommendation and prescription of drug products that are granted marketing approval. Arrangements with providers, consultants, third-party payors and customers are subject to broadly applicable fraud and abuse, anti-kickback, false claims laws, patient privacy laws and regulations and other healthcare laws and regulations that may constrain business and/or financial arrangements. Restrictions under applicable federal and state healthcare laws and regulations, include the following: • the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, paying, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid; • the federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary penalties laws, which prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false, fictitious or fraudulent or knowingly making, using or causing to be made or used a false record or statement to avoid, decrease or conceal an obligation to pay money to the federal government; • the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal laws that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or making false statements relating to health care matters; • HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their respective implementing regulations, including the Final Omnibus Rule published in January 2013, which impose obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; • Foreign Corrupt Practices Act, or FCPA, which prohibits companies and their intermediaries from making, or offering or promising to make improper payments to non-U.S. officials for the purpose of obtaining or retaining business or otherwise seeking favorable treatment; • the federal false statements statute, which prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services; • the federal transparency requirements known as the federal Physician Payments Sunshine Act, under the Patient Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation Act, or the Affordable Care Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies to report annually to the Centers for Medicare & Medicaid Services, or CMS, within the United States Department of Health and Human Services, information related to payments and other transfers of value made by that entity to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and • analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to healthcare items or services that are reimbursed by non-government third-party payors, including private insurers. 31 Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Pharmaceutical Coverage and Reimbursement In the United States and markets in other countries, patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Significant uncertainty exists as to the coverage and reimbursement status of products approved by the FDA and other government authorities. Thus, even if a product candidate is approved, sales of the product will depend, in part, on the extent to which third-party payors, including government health programs in the United States such as Medicare and Medicaid, commercial health insurers and managed care organizations, provide coverage and establish adequate reimbursement levels for, the product. The process for determining whether a payor will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the product once coverage is approved. Third-party payors are increasingly challenging the prices charged, examining the medical necessity and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs. Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the approved products for a particular indication. In order to secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to the costs required to obtain FDA or other comparable marketing approvals. Nonetheless, product candidates may not be considered medically necessary or cost effective. A decision by a third-party payor not to cover a product could reduce physician utilization once the product is approved and have a material adverse effect on sales, results of operations and financial condition. Additionally, a payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage and reimbursement for the product, and the level of coverage and reimbursement can differ significantly from payor to payor. The containment of health care costs also has become a priority of federal, state and foreign governments and the prices of products have been a focus in this effort. Governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit a company’s revenue generated from the sale of any approved products. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which a company or its collaborators receive marketing approval, less favorable coverage policies and reimbursement rates may be implemented in the future. There have been a number of federal and state proposals during the last few years regarding the pricing of pharmaceutical and biopharmaceutical products, limiting coverage and reimbursement for drugs and other medical products, government control and other changes to the healthcare system in the United States. In March 2010, the United States Congress enacted the Affordable Care Act, or ACA, which, among other things, includes changes to the coverage and payment for drug products under government health care programs. Among the provisions of the ACA of importance to our potential product candidates are: • an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs; • expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability; • expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate for both branded and generic drugs and revising the definition of “average manufacturer price,” or AMP, for calculating and reporting Medicaid drug rebates on outpatient prescription drug prices; • addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected; • expanded the types of entities eligible for the 340B drug discount program; • established the Medicare Part D coverage gap discount program by requiring manufacturers to provide a 70% as of January 1, 2019 point-of-sale-discount off the negotiated price of applicable brand drugs to eligible 32 beneficiaries during their coverage gap period as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D; and • a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research. Other legislative changes have been proposed and adopted in the United States since the ACA was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers up to 2% per fiscal year, which went into effect in April 2013 and, due to subsequent legislative amendments, will remain in effect through 2027 unless additional Congressional action is taken. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional health care authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs. These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in additional pricing pressures. The demand for our products is predicated on our clinical trial strategy of attempting to achieve superiority against the standard-of-care. If there are not adequate reimbursement levels, our business and results of operations could be adversely affected. Human Capital In order to be a competitive, innovative and successful Company, we believe it is critical to attract, engage, motivate and retain a dedicated, talented and innovative team of employees. As part of these efforts, we strive to foster a diverse, equitable and inclusive community, invest in continuous learning and development, offer a competitive compensation and benefits program and provide a safe and healthy workplace. Our success starts and ends with having the best talent and, as a result, we are focused on attracting, developing, and engaging our employees. In 2021, Summit has notably strengthened the team by continuing to attract a number of leading world class employees into the Company. These new recruits have successful track records and are acknowledged leaders in their field. As of December 31, 2021, we had 105 full-time employees and 110 total employees. Of our total workforce, approximately 67% work in research and development, and 33% work in finance, legal, information technology, general management and other administrative functions. Approximately 60% and 40% of our workforce is located in the U.S. and the U.K., respectively. In 2021, we once again made challenging demands of our employees and they have responded with dedication and enthusiasm. In 2021, Summit launched an engagement survey, in which over 80% of employees responded. The results of this survey reflected an overall positive response by employees, particularly highlighting both the enjoyment of their work and the team they work with. Compensation and Benefits We provide robust compensation and benefits programs to attract, motivate and retain our employees. In addition to competitive compensation, we provide generous benefits including employer contributions to pension/401k plans, an employee stock purchase plan, insurance benefits, healthcare programs and paid vacation. We are committed to ensuring that our total compensation packages are competitive while supporting our business plans and strategies. Diversity, Equity and Inclusion We are committed to embedding a culture of diversity, equity and inclusion across our Company. We believe that diversity of gender, race, ethnicity, sexual orientation, culture, education, background and experience fuels innovation and enables our employees to succeed. This includes ensuring opportunity for all and embraces the positive effect that our diverse workforce brings. We do not tolerate any form of discrimination and our employment policies and practices focus on ensuring that all our employment processes are free from discrimination or harassment on any grounds. Approximately 60% of our employees are female and 62% of our executive team is female. 33 Learning and Development We are committed to investing in learning and development for our employees. Our employees have access to online training courses which cover a wide range of technical and business topics to help them develop their professional skills and explore other areas as they plan for their career and personal growth. Our performance management process includes timely performance feedback and career development discussions which are critical to each employee’s continued growth and development within the organization. Workplace Health and Safety and Pandemic Response We are committed to the health and safety of all of our employees. We accomplish this through strict compliance with applicable laws and regulations regarding workplace safety. We have continued to maintain our focus on the health and safety of our employees especially as the COVID-19 pandemic has evolved, including maintaining protocols for social distancing, daily onsite health checks and allowing our employees to work remotely as necessary based upon local government health recommendations. Our experienced teams continue to adapt quickly to the changes and have managed our business successfully during this challenging time. Our Corporate Information On September 18, 2020, pursuant to a scheme of arrangement under UK law, we became the parent company of the Summit Therapeutics plc group of companies, including Summit Therapeutics plc, a public limited company incorporated under the laws of England and Wales with the Registrar of Companies of England and Wales. Pursuant to the scheme of arrangement, all outstanding ordinary shares of Summit Therapeutics plc were exchanged for shares of our common stock on a five for one basis. In connection with the scheme of arrangement, Summit changed its corporate domicile from the United Kingdom to Delaware. Our principal executive offices are located at One Broadway, 14 th Floor, Cambridge, MA States 02142, and our telephone number is +1 617 514 7149. Our website address is www.summittxinc.com . The information contained on, or that can be accessed through, our website is not incorporated by reference into this Report or in any other report or document we file with the SEC, and any reference to our website address is intended to be an inactive textual reference only. We own or have rights to trademarks, service marks, and trade names that we use in connection with the operation of our business, including our corporate name, logos and website names. Other trademarks, service marks, and trade names appearing in this Report are the property of their respective owners. Solely for convenience, some of the trademarks, service marks, and trade names referred to in this Report are listed without the ® and ™ symbols. Available Information We are the successor to Summit Therapeutics plc for various purposes under the Exchange Act and, through the filing of a Current Report on Form 8-K filed pursuant to Rule 12g-3 under the Exchange Act, have assumed Summit Therapeutics plc's Commission file number (001-36866). We began filing reports under the Exchange Act with the filing of that Current Report on Form 8-K. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act will be posted on our website as soon as reasonably practicable after electronic filing with or furnishing to the Securities and Exchange Commission and the Annual Reports on Form 20-F and Reports on Form 6-K filed by Summit Therapeutics plc prior to the completion of the Redomiciliation Transaction are available on our website. All such postings on our website can be accessed free of charge. 34