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Item 1A. Risk Factors

2023-03-09 compared with 2022-03-17 · 411 added, 395 removed, 566 unchanged (59% of the section changed)

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Risks Related to our Financial Position and Need for Additional Capital

We depend heavily on the success of our product candidates.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Additionally, if one of our partners

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

The License Agreement and the transactions contemplated thereby represent a significant change in the Company’s strategic focus, may not achieve intended results and could increase the number of our outstanding shares or amount of outstanding debt.

As the Company previously announced, on September 28, 2022, we determined that we would seek partners or a divestiture of ridinilazole, our lead product candidate for treating patients suffering from CDI, as the path forward for the clinical development of the asset.

As a result of this determination, we discontinued our only active study for ridinilazole, a pediatric clinical trial evaluating ridinilazole for treating adolescent patients with CDI.

We are currently involved in activities related to closeout of ridinilazole clinical trials.

On December 5, 2022 we entered into the License Agreement with Akeso pursuant to which Akeso granted the Company an in-license to its breakthrough bispecific antibody, ivonescimab, in the Licensed Territory.

The entry into the License Agreement and potential partnership or divestiture of ridinilazole represents a significant change in the Company’s strategy.

All prior development and marketing activities relating to ridinilazole are being terminated and our future operations will be heavily dependent on the License Agreement and other future activities as the Company determines.

The success of this transaction will depend, in part, on the clinical success of ivonescimab as well as the success of our collaboration with Akeso.

This transaction may not result in the realization of the full benefit of any anticipated growth opportunities or these benefits may not be realized within the expected time frames.

Our Company has no prior history of a successful product candidate and, as discussed above, we determined that we would seek partners or a divestiture for our prior lead product candidate, ridinilazole, and will continue to pursue partnerships for further development of SMT-738.

We will also require significant additional financing to fund the clinical development plan and certain payments contemplated by the License Agreement that could result in an increase in the number of our outstanding shares or the aggregate amount of our debt.

If we are unable to raise capital to fund these additional payments, it may cause a material adverse effect on our business.

Given the License Agreement that we entered into in December 2022 and shift in focus to oncology, the Company decided it will cease further investment in the Discuva platform and evaluate further options for the use of the Discuva Platform.

We depend heavily on the success of ivonescimab.

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

We plan to invest a significant portion of our efforts and financial resources in the development of ivonescimab, which is still in clinical development.

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

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

• Ability to use data of patients from Akeso’s clinical trials in China in seeking regulatory approval;

• successful completion of clinical development;

• receipt of marketing approvals from applicable regulatory authorities;

• establishing supply chain and commercial manufacturing arrangements with third-party manufacturers;

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

• protecting our rights in our intellectual property portfolio;

• establishing sales, marketing and distribution capabilities;

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

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

• obtaining adequate pricing and a reimbursement profile;

• ensuring no disruption in supply or lack of sufficient quantities of ivonescimab;

• effectively competing with other therapies;

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

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

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

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Since inception, we have incurred significant operating losses.

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

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

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

During the year ended December 31, 2022, we incurred a net loss of $78.8 million, and cash flows used in operating activities was $41.6 million.

As of December 31, 2022 we had an accumulated deficit of $378.3 million, cash and cash equivalents of $348.6 million, restricted cash of $300,000, research and development tax credits of $5.8 million and accounts receivable of $0.3 million.

These losses could continue for the next several years as we invest in clinical development of ivonescimab.

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

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

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

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

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

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

We anticipate that our expenses may increase substantially as we:

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

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

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

• seek further regulatory advancement for ridinilazole;

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

• perform our obligations under our collaboration agreements;

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

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

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

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

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

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

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

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

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

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

We have not yet demonstrated our ability to successfully complete development of any product candidates which may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• the extent to which we acquire or invest in other businesses, products and technologies;

• the rate of the expansion of our physical presence;

• the extent to which we change our physical presence

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

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

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

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

In addition, we may

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

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

We expect our research and development expenses to increase substantially in connection with our ongoing activities, particularly in connection with the License Agreement.

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

If we are unable to raise capital when needed or on attractive terms, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Our primary future capital requirements will be related to our obligations under the License Agreement.

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

The License Agreement calls for initial consideration payments of $500 million (which have been paid), as well as total contingent payments by the Company of up to $5.0 billion, as Akeso will be eligible to receive regulatory milestones of up to $1.05 billion and commercial milestones of up to $3.45 billion, many of which will be due before the Company anticipates generating any revenue from the License Agreement.

We entered into the Note Purchase Agreement to fund the initial consideration payments and we will need additional capital to fund our operations and payments under the License Agreement and the Note Purchase Agreement.

We may anticipate the need for further capital raises to repay the remaining $100 million principal balance under the Note Purchase Agreement.

We also anticipate further capital raises to repay the remaining borrowings under the Note Purchase Agreement.

We do not have any committed external sources of funds with respect to SMT112.

Raising additional capital may cause dilution to our investors, restrict our operations or require us to relinquish rights to our technologies or product candidates.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, collaborations, strategic alliances, grants and clinical trial support from government entities, philanthropic, non-government and not-for-profit organizations and patient advocacy groups, debt financings, and marketing, distribution or licensing arrangements.

We do not have any committed external source of funds other than the amounts we are entitled to receive from BARDA under our contract with them to fund, in part, the clinical and regulatory development of ridinilazole and from Eurofarma under our license and commercialization agreement with them.

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

We do not have any committed external source of funds.

We will need to seek additional funding in the future to fund operations.

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

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

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

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

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

Risks Related to our Financial Dependence on Third Parties

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

If this option work

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

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

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

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

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

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

Contracts and grants awarded by the U.S.

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

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

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

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

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

• suspend contract performance if Congressionally appropriated funding becomes unavailable;

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

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

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

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

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

• impose U.S.

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

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

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

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

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

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

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

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

government contracts.

In addition, U.S.

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

These requirements include, for example:

• specialized accounting systems unique to government contracts;

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

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

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

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

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

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

government contracts,

funding programs and regulatory approvals.

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

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

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

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

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

We have substantial indebtedness and may require additional indebtedness in the future, which may require us to use a substantial portion of our cash flow to service debt and limit our financial and operating flexibility.

We have substantial indebtedness and may require additional indebtedness in the future.

As of March 7, 2023, we had a total of $100 million of indebtedness outstanding under the Note Purchase Agreement.

Further, the License Agreement calls for certain additional future payment obligations and we may require additional indebtedness to fund those obligations.

Our existing and future indebtedness will require interest payments and need to be repaid or refinanced and could require us to divert funds identified for other purposes to service our debt, could result in cash demands and impair our liquidity position and could result in financial risk for us.

Diverting funds identified for other purposes for debt service may adversely affect our growth prospects.

If we cannot generate sufficient cash flow from operations to service our debt, we may need to refinance our debt, dispose of assets, or issue equity to obtain necessary funds.

We do not know whether we would be able to take any of these actions on a timely basis, on terms satisfactory to us, or at all.

The Company’s failure to comply with the terms and obligations of the Note Purchase Agreement, including as a result of events beyond our control, may result in an event of default.

The Note Purchase Agreement requires us to comply with certain repayment obligations, representations and covenants.

A breach of any of these obligations, representations or covenants or the occurrence of certain other specified events could result in an event of default under the Note Purchase Agreement.

Upon the occurrence of any event of default under the Note Purchase Agreement, the outstanding balance on the corresponding Note will, at the option of such lender, become immediately and automatically due and payable in cash and a default interest rate of an additional 2% per annum will apply on all outstanding obligations during the occurrence and continuance of an event of default.

We may not be able to maintain compliance with these repayment obligations and covenants in the future and, if we fail to do so, that we may not able to obtain waivers from the lenders and/or amend the covenants.

Our failure to comply with the repayment obligations and covenants described above could result in an event of default, which, if not cured or waived, and if lender accelerates, would result in us being required to repay these borrowings before their due date.

If we are forced to refinance these borrowings on less favorable terms or if we are unable to refinance these borrowings, our business, financial condition, and results of operations could be materially adversely affected.

Risks Related to our Financial and Intellectual Property Dependencies on Third Parties

We depend on our relationship with, and the comprehensiveness of the intellectual property licensed from, Akeso, and termination of the License Agreement, any of the licenses under the License Agreement, or issues as to intellectual property could have a material adverse effect on our business.

We depend on the know-how and other intellectual property licensed from Akeso through the License Agreement for the development and, if approved, commercialization of product candidates with the use of Akeso’s bispecific antibody, ivonescimab.

If the License Agreement is terminated, or found to be unenforceable, it could result in the loss of significant rights and could harm our ability to commercialize ivonescimab.

The License Agreement imposes certain obligations on us, including obligations to use diligent efforts to meet development thresholds, funding requirements, payment obligations, patent prosecution and commercialization.

If we are unable to meet our obligations, some or all of our rights under the agreement may be restricted or terminated.

Our primary product candidate, ivonescimab, is subject to a license from Akeso, which is revocable in certain circumstances, including in the event we do not achieve certain payment deadlines.

Without the license, we will not be able to continue to develop ivonescimab.

The License Agreement may be terminated by Akeso in the event of a material breach by us or if we default in the performance of any of our material obligations under the License Agreement, and such default continues for 90 days, or with respect to any breach of any undisputed payment obligations, for 60 days, or with respect to any breach of a supply requirement, for 30 days after written notice thereof.

Akeso may also terminate the agreement upon written notice upon the Company’s bankruptcy.

We may not continue to be able to make the various payment obligations under the License Agreement, including certain significant payments due upon satisfaction of pre-commercialization milestones.

If the License Agreement were to be terminated by Akeso for any reason, we would lose our most significant asset and primary product candidate, and would likely not be able to develop ivonescimab, which would have a material adverse effect on our operations.

Additionally, the ability of Summit to realize the full potential of the License Agreement may be severely limited by factors involving intellectual property rights including:

• whether and to what extent our technology and processes infringe on intellectual property rights of Akeso or other third parties that are not subject to the License Agreement;

• whether Akeso had the right to grant the licenses under the License Agreement;

• whether third parties are entitled to compensation or equitable relief, such as an injunction, for our use of intellectual property without their authorization;

• our right to sublicense patent and other rights to third parties under collaborative development relationships;

• our compliance with our obligations with respect to the use of the licensed technology in relation to our development and commercialization of product candidates;

• ownership of specific intellectual property;

• our involvement in and ability to align on the prosecution and enforcement of the licensed patents and patent applications and Akeso’s overall patent prosecution, intellectual property protection and enforcement strategies;

• the impact on payments and costs associated with commercialization if there is blocking intellectual property in or costs associated with prosecution, maintenance and enforcement under the License Agreement.

These issues, if they arise, could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, increase what we believe to be our financial or other obligations under the relevant agreement, or increase our costs to develop, manufacture and commercialize products under the License Agreement.

We will be reliant on Akeso for knowledge transfer relating to manufacturing of our product candidate.

The loss of any of the knowledge transferred relating to ivonescimab from Akeso may cause us to incur additional transition costs or result in delays in the manufacturing and delivery of our product candidate.

We have entered into the License Agreement and will enter into a Supply Agreement with Akeso for information and drug substance that we will rely on to be used in our product candidate, and the termination or Akeso’s breach of these agreements could have a material adverse effect on our business.

Further, failure of Akeso to adequately transfer knowledge to the Company to continue to produce ivonescimab could have a material adverse effect on our business.

Manufacturing of biological compounds is inherently complex and establishing new manufacturing relationships with a third party manufacturer may take longer, resulting in higher costs and potential inventory issues.

Manufacturing processes may use materials which Summit may not be able to secure, requiring Summit to have to develop alternative processes and delay manufacturing.

The product may not comply with the FDA quality requirements and/or have sufficient stability for commercialization, which may require additional manufacturing development and delays.

As Summit is relying initially on supply from Akeso, any delays in obtaining import or export licenses may delay start of clinical trials.

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

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

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

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

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

We may enter into third-party collaborations for the development and commercialization of ivonescimab.

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

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

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

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

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

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

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

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

We have supply agreements with Akeso for supply of ivonescimab for use in clinical trials as well as for commercial supply.

We are in the process of setting up agreements with third party manufacturers for the long-term clinical and commercial supply of ivonescimab.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Risks Related to Our Industry and Market

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

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

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

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

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

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

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

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

Several pharmaceutical and biotechnology companies have established themselves in the market for the treatment of non-small cell lung cancer ("NSCLC"), and several additional companies are developing products for the treatment of NSCLC.

Currently, the most commonly used treatments for NSCLC are several immuno-oncology drugs and chemotherapies, administered either as monotherapy or in combination with other approved therapeutics.

NSCLC treatment regimens vary due to several factors, including genetic mutations and progression of disease.

Several medications have been approved by FDA for these treatments, including, but not limited to pembrolizumab, atezolizumab, nivolumab and durvalumab.

In addition several potential therapeutics are in various stages of development and clinical trials for treatment of NSCLC.

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

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

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

In addition to the License Agreement and the transactions contemplated thereby, we may pursue business development opportunities to expand or enhance our pipeline of drug candidates, including without limitation, through potential acquisitions of and/or collaborations with other entities.

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

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

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

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

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

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

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

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

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

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

Risks Related to the COVID-19 Pandemic

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Evaluating potential transactions and integrating completed ones may divert the attention of our management from ordinary operating matters.

The success of these potential transactions will depend, in part, on our ability to realize the anticipated growth opportunities through the successful integration of the businesses we acquire with our existing business, as well as the

success of the underlying business or intellectual property that we acquire or otherwise obtain rights to.

Even if we are successful in integrating the acquired businesses, these integrations may not result in the realization of the full benefit of any anticipated growth opportunities or these benefits may not be realized within the expected time frames.

In addition, acquired businesses may have unanticipated liabilities or contingencies.

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

Risks Related to the Development and Commercialization of our Product Candidates

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

Food and Drug Administration, or the FDA, or the European Medicines Agency, or the EMA, or do not otherwise produce favorable results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of ridinilazole or any other product candidate.

In connection with obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans.

In connection with obtaining marketing approval from regulatory authorities for the sale of ivonescimab, or any other product candidate, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans.

Clinical testing is expensive, difficult to design and implement, can take many years to complete and is inherently uncertain as to outcome.

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

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

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

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

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

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

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

To date, we have not conducted a clinical trial for ivonescimab and cannot predict the results of such trials.

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

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• clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs;

• the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate for various reasons, including due to contagious diseases or illnesses, such as the novel coronavirus, as described below;

• we may be unable to enroll a sufficient number of patients in our clinical trials to ensure adequate statistical power to detect any statistically significant treatment effects;

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

• regulators, institutional review boards or independent ethics committees may require that we or our investigators materially modify the terms of our clinical research in order to meet additional requirements for receiving marketing approval, including by requiring that we enlarge our trials, broaden the scope of our research, or perform studies in

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

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

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

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

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

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

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

CDI is an acute infection that requires rapid diagnosis.

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

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

For our clinical trials of ivonescimab, we need to identify potential patients, potentially test them for specific diagnoses and enroll them.

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

Patient enrollment is affected by other factors, including:

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

Our inability to enroll a sufficient number of patients in our ongoing clinical trials of ridinilazole or any other planned clinical trials would result in significant delays, may generate a limited data set from which no meaningful conclusions could be made, or may require us to abandon one or more clinical trials altogether.

If serious adverse or inappropriate side effects are identified during the development of ridinilazole or any other product candidate, we may need to abandon or limit our development of that product candidate.

Our inability to enroll a sufficient number of patients in our planned clinical trials of ivonescimab or any other planned clinical trials would result in significant delays, may generate a limited data set from which no meaningful conclusions could be made, or may require us to abandon one or more clinical trials altogether.

If serious adverse or inappropriate side effects are identified during the development of ivonescimab or any other product candidate, we may need to abandon or limit our development of that product candidate.

All of our product candidates are in clinical or early-stage development and their risk of failure is high.

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If our product candidates are associated with undesirable side effects or have characteristics that are unexpected, we may need to abandon their development or limit development to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective.

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

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

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

Often, it is not possible to determine conclusively whether or not the product candidate being studied caused a particular adverse event.

Regulatory authorities may draw different conclusions or require additional testing to confirm these determinations, if they occur.

In addition, it is possible that as we test ridinilazole in a larger clinical program, illnesses, discomforts and other adverse events that were observed in earlier clinical trials, as well as conditions that did not occur or went undetected in previous trials, will be reported by clinical trial patients.

Many compounds that initially showed promise in clinical or earlier stage testing have later been found to cause side effects or other safety issues that prevented further development of the compound.

If we elect or are forced to suspend or terminate any clinical trial of our product candidates, the commercial prospects of such product candidate will be harmed and our ability to generate product revenues from such product candidate will be delayed or eliminated.

If we elect or are forced to suspend or terminate any clinical trial of our product candidates, the commercial prospects of such product candidate will be harmed and our ability to

generate product revenues from such product candidate will be delayed or eliminated.

Any of these occurrences could materially harm our business.

Even if ridinilazole or any other product candidate receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.

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

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

Even if ivonescimab or any other product candidate receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success.

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

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

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• the prevalence and severity of any side effects;

• the ability to offer our product candidates for sale at competitive prices, including in the case of ridinilazole, which we expect, if approved, will compete with the antibiotics vancomycin and metronidazole, both of which are available in generic form at low prices, and fidaxomicin, and potentially other approaches to be used as an adjunctive therapy to antibiotics, such as the monoclonal antibody bezlotoxumab, vaccines or fecal biotherapy;

• the ability to offer our product candidates for sale at competitive prices;

• convenience and ease of administration compared to alternative treatments;

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

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

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

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

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

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

We will rely on Eurofarma to commercialize ridinilazole in Argentina,

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

If ivonescimab receives marketing approval, we may seek commercialization partners in some parts of the Licensed Territory.

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

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• unforeseen costs and expenses associated with creating an independent sales and marketing organization.

If we enter into arrangements with third parties to perform sales and marketing services, our product revenues or the profitability of these product revenues to us are likely to be lower than if we were to market and sell any products that we develop ourselves.

develop ourselves.

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

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

Biologics, such as ivonescimab, carry unique risks and uncertainties, which could have a negative impact on our business.

The successful development, manufacturing and sale of biologics is a long, expensive and uncertain process.

There are unique risks and uncertainties with biologics.

For example, access to and supply of necessary biological materials, such as cell lines, may be limited and governmental regulations restrict access to and regulate the transport and use of such materials.

In addition, the development, manufacturing and sale of biologics is subject to regulations that are often more complex and extensive than the regulations applicable to other pharmaceutical products.

Manufacturing biologic, especially in large quantities, is often complex and may require the use of innovative technologies.

Such manufacturing also requires facilities specifically designed and validated for this purpose and sophisticated quality assurance and quality control procedures.

Biologics are also frequently costly to manufacture.

Failure to successfully, develop, manufacture and sell ivonescimab could adversely affect our business

We may expend our limited resources to pursue a particular product candidate and fail to capitalize on product candidates that may be more profitable or for which there is a greater likelihood of success.

Notwithstanding our large investment to date and anticipated future expenditures in proprietary technologies, we have not yet developed, and may never successfully develop, any marketed drugs.

As a result of pursuing the development of product candidates using our proprietary technologies, we may fail to develop product candidates or address indications based on other scientific approaches that may offer greater commercial potential or for which there is a greater likelihood of success.

Research programs to identify new product candidates require substantial technical, financial and human resources.

These research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development.

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

Legal, Tax, Regulatory and Compliance Risks

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

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

The regulations that govern marketing approvals, pricing, coverage and reimbursement for new drug products vary widely from country to country.

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

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

Our ability to commercialize ivonescimab or any other product candidate successfully also will depend in part on the extent to which coverage and adequate reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations.

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

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Increasingly, third-party payors are requiring that drug companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products.

For example, under Medicare, hospitals are reimbursed under an inpatient prospective payment system.

This pricing methodology provides a single payment amount to hospitals based on a given diagnosis-related group.

As a result, with respect to Medicare reimbursement for services in the hospital inpatient setting, hospitals could have a financial incentive to use the least expensive drugs for the treatment of CDI, generic antibiotics, which may significantly impact our ability to charge a premium for ridinilazole.

We cannot be sure that coverage and reimbursement will be available for ridinilazole or any other product that we commercialize and, if coverage and reimbursement are available, the level of reimbursement.

We cannot be sure that coverage and reimbursement will be available for ivonescimab or any other product that we commercialize and, if coverage and reimbursement are available, the level of reimbursement.

Reimbursement may impact the demand for, or the price of, any product candidate for which we obtain marketing approval.

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

If reimbursement is not

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

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

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

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If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be adversely affected.

Our business is subject to the risks associated with doing business in China.

As a result of our reliance on Akeso, located in China, our results of operations, financial condition, and prospects are subject to a significant degree to economic, political, and legal developments in China including government control over capital investments or changes in tax regulations that are applicable to us.

China’s economy differs from the economies of most developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate and control of foreign exchange, and allocation of resources.

Since we rely on an entity located in China, our business is subject to the risks associated with doing business in China, including:

• adverse political and economic conditions, particularly those potentially negatively affecting the trade relationship between the United States and China;

• trade protection measures, such as tariff increases, and import and export licensing and control requirements;

• potentially negative consequences from changes in tax laws;

• difficulties associated with the Chinese legal system, including increased costs and uncertainties associated with enforcing contractual obligations in China;

• historically lower protection of intellectual property rights;

• requirements relating to China’s data security rules and regulations;

• requirements relating to China personal information protection laws

• changes and volatility in currency exchange rates;

• unexpected or unfavorable changes in regulatory requirements;

• difficulties in managing foreign relationships and operations generally .

U.S.-China trade relations may adversely impact our supply chain operations and business.

and Chinese governments have taken certain actions that change trade policies, including tariffs that affect certain products which are manufactured in China and mutual exchange of certain types of data.

Due to our collaboration with Akeso, we are reliant on collaborating with a company with significant operations in China.

It is unknown whether and to what extent new tariffs, laws or regulations will be adopted that increase the cost or feasibility of importing and/or exporting products, components and information from China to the United States and vice versa.

Further, the effect of any such new tariffs or actions on our industry and customers is unknown and difficult to predict.

As additional new tariffs, legislation and/or regulations are implemented, or if existing trade agreements are renegotiated or if China or other affected countries take retaliatory trade actions, such changes could have a material adverse effect on our clinical development plans, business, financial condition, results of operations or cash flows.

Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products that we may develop.

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

We will need to increase our insurance coverage when and if we begin commercializing ridinilazole or any other product candidate that receives marketing approval.

We will need to increase our insurance coverage when and if we begin commercializing ivonescimab or any other product candidate that receives marketing approval.

Insurance coverage is increasingly expensive.

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Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

Because we have limited financial and managerial resources, we focus on specific product candidates.

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

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

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

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

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

Notwithstanding our large investment to date and anticipated future expenditures in proprietary technologies that we use in the discovery of product candidates for CDI and other infectious diseases, we have not yet developed, and may never successfully develop, any marketed drugs.

Research programs to identify new product candidates require substantial technical, financial and human resources.

These research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development.

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

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

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

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

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

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

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

Recent and potential future changes to U.S.

tax laws could materially adversely affect our company and holders of our shares of common stock.

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

United States

Recent changes in tax law may adversely affect our business or financial condition.

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Internal Revenue Code of 1986, as amended, or the Code.

The TCJA, among other things, contained significant changes to corporate taxation, including a reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, the limitation of the tax deduction for net interest expense to 30% of adjusted taxable income (except for certain small businesses), the limitation of the deduction for net operating losses arising in taxable years beginning after December 31, 2017 to 80% of current year taxable income and elimination of net operating loss carrybacks for losses arising in taxable years ending after December 31, 2017 (though any such net operating losses may be carried forward indefinitely), the imposition of a one-time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, the elimination of U.S.

tax on foreign earnings (subject to certain important exceptions), the allowance of immediate deductions for certain new investments instead of deductions for depreciation expense over time, and the modification or repeal of many business deductions and credits.

As part of Congress’ response to the COVID-19 pandemic, the Families First Coronavirus Response Act, or FFCR Act, was enacted on March 18, 2020, and the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was enacted on March 27, 2020.

Both contain numerous tax provisions.

In particular, the CARES Act retroactively and temporarily (for taxable years beginning before January 1, 2021) suspends application of the 80%-of-income limitation on the use of net operating losses, which was enacted as part of the TCJA.

It also provides that net operating losses arising in any taxable year beginning after December 31, 2017, and before January 1, 2021 are generally eligible to be carried back up to five years.

The CARES Act also temporarily (for taxable years beginning in 2019 or 2020) relaxes the limitation of the tax deductibility for net interest expense by increasing the limitation from 30% to 50% of adjusted taxable income.

Regulatory guidance under the TCJA, the FFCR Act and the CARES Act is and continues to be forthcoming, and such guidance could ultimately increase or lessen impact of these laws on our business and financial condition.

It is also likely that Congress will enact additional legislation in connection with the COVID-19 pandemic, some of which could have an impact on our company.

In addition, it is uncertain if and to what extent various states will conform to the TCJA, the FFCR Act or the CARES Act.

Future changes in tax laws, regulations and treaties, or the interpretation thereof, in addition to initiatives related to the Base Erosion and Profit Shifting, or BEPS, Project of the Organisation for Economic Co-Operation and Development, or OECD;

the European Commission’s “state aid” investigations;

and other developments could have an adverse effect on the taxation of international businesses, including our own.

Furthermore, countries where we are subject to taxes, including the United States, evaluate their tax policies and rules on a regular basis, and we may see significant changes in legislation and regulations concerning taxation.

Laws and regulations affecting government contracts, including our BARDA contract, make it more costly and difficult for us to successfully conduct our business.

The TCJA, among other things, contained significant changes to corporate taxation, including the limitation of the tax deduction for net interest expense to 30% of adjusted taxable income (except for certain small businesses), the limitation of the deduction for net operating losses arising in taxable years beginning after December 31, 2017 to 80% of current year taxable income, the allowance of net operating losses arising in taxable years beginning after December 31, 2017 to be carried forward indefinitely, the allowance of immediate deductions for certain new investments instead of deductions for depreciation expense over time, and the modification or repeal of many business deductions and credits.

Beginning with costs incurred in 2022, the TCJA also eliminated the option to deduct research and development expenditures currently and requires taxpayers to capitalize and amortize them over five or fifteen years pursuant to Internal Revenue Code Section 174.

This does not increase our effective tax rate or our cash tax payable in 2022.

However, if the requirement to capitalize Section 174 expenditures is not modified, it may also impact our effective tax rate and our cash tax liability in future years.

United Kingdom

Recent announcements of changes in the UK R&D regime are likely to impact the level of cash benefit that the Company will be able to receive in respect of the R&D activity.

As a result of a reduction in rates applied in the SME regime, the cash credit that the Company will be able to obtain is likely to reduce if the qualified spending remains consistent.

This will be partly offset by an increase in the RDEC regime.

In addition, there is a refocus of relief towards UK activity and therefore costs outside the UK are expected to be restricted going forward with further changes anticipated following a government consultation being launched with the intention of merging the SME and RDEC schemes.

Our ability to use our U.S.

federal, U.S.

state and foreign net operating losses and other tax attributes may be limited.

Our ability to use our U.S.

federal, U.S.

state and foreign net operating losses to offset potential future taxable income and related income taxes that would otherwise be due is dependent upon our generation of future taxable income, and we cannot predict with certainty when, or whether, we will generate sufficient taxable income to use all of our net operating losses.

federal tax losses for tax years beginning before January 1, 2018 and prior tax years will carry forward to offset future taxable income, if any, until such unused losses expire.

federal tax losses generated for tax year beginning after December 31, 2017 will not expire and may be carried forward indefinitely, and generally may not be carried back to prior taxable years, except that, under the CARES Act, net operating losses generated in 2018, 2019 and 2020 may be carried back to each of the five tax years preceding the tax years of such losses.

Additionally, for taxable years beginning after December 31, 2020, the deductibility of such U.S.

federal net operating losses is limited to 80% of our taxable income in any future taxable year.

In addition, both our current and our future unused U.S.

federal and state tax losses and unused U.S.

federal and state research and development tax credits may be subject to limitation under Sections 382 and 383 of the Internal Revenue Code ("IRC" or "the Code") of 1986, as amended, if we undergo an “ownership change,” generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a rolling three-year period.

We may have experienced such ownership changes in the past, and we may experience ownership changes in the future as a result of shifts in our stock ownership, some of which are outside our control.

As of December 31, 2022 and 2021, we reported U.S.

federal and state gross operating loss carryforwards of approximately $18.9 million and $10.9 million, respectively, and federal research and development tax credit carryforwards of $1.7 million and $0.9 million, respectively.

Our ability to utilize those net operating loss carryforwards could be limited by an “ownership change” as described above, which could result in increased tax liability to us.

As of December 31, 2022, we reported foreign gross operating loss carryforwards of $199.1 million.

Our ability to utilize those net operating loss carryforwards are dependent upon our generation of future taxable income.

Laws and regulations affecting government contracts, such as BARDA and CARB-X , make it more costly and difficult for us to successfully conduct our business.

Failure to comply with these laws and regulations could result in significant civil and criminal penalties and adversely affect our business.

We must comply with numerous laws and regulations relating to the administration and performance of our government contracts, including our BARDA contract.

Among the most significant government contracting regulations are:

• the Federal Acquisition Regulation, or FAR, and agency-specific regulations supplemental to the FAR, which comprehensively regulate the procurement, formation, administration and performance of government contracts;

• extensive U.S.

government regulation of government-funded clinical research activities, including, for example, compliance requirements relating to protection of human and animal research subjects, restrictions on uses of human research materials, and conditions on dissemination of research results;

• business ethics and public integrity obligations, which govern areas such as conflicts of interest, the recruitment and hiring of former government employees, bribes and gratuities, and limitations on and mandatory disclosure of lobbying activities, pursuant to laws such as the Anti-Kickback Act, the Procurement Integrity Act, the False Claims Act and the Foreign Corrupt Practices Act;

• export control and import laws and regulations.

In addition, U.S.

government agencies such as the Department of Health and Human Services and the Defense Contract Audit Agency routinely audit and investigate government contractors for compliance with applicable laws and standards.

These agencies review a contractor’s performance under its contracts, cost structure and compliance with applicable laws, regulations and standards.

These agencies also review the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation and management information systems.

Any costs found to be unreasonable, unallowable under applicable reimbursement policies, or improperly allocated to a specific contract will not be paid, while such costs already paid must be refunded.

Claims for costs that are expressly unallowable under applicable reimbursement policies may also be subject to administrative penalties.

If we are audited and such audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including:

• termination of any government contracts, including our BARDA contract;

• suspension of payments;

• administrative sanctions, such as long-term monitoring arrangements;

• suspension, debarment, or exclusion from eligibility for U.S.

government contracts, funding programs and regulatory approvals.

W e must comply during the term of such government contracts and upon expiration/termination of such contracts, as to continuing obligations, with numerous laws and regulations.

These laws, regulations and obligations include, for example, the Federal Acquisition Regulation, compliance regulations, business ethics and public integrity obligations, export and import laws and regulations, etc.

Additionally, government agencies routinely audit and investigate government contractors for compliance with the applicable laws and standards.

If an audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties including fines, debarment and exclusion from government funding and administrative sanctions, such as long-term monitoring arrangements and exclusion from regulatory approvals.

In addition, we could suffer serious reputational harm if allegations of impropriety were made against us, which could jeopardize our other research programs, deter research institutions from engaging with us, and cause our stock price to decrease.

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If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize our product candidates, and our ability to generate revenue will be materially impaired.

Our product candidates, including ridinilazole, and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and by comparable authorities in other countries.

Our product candidates, including ivonescimab, and the activities associated with their development and commercialization, including their design, testing, manufacture, safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA and by comparable authorities in other countries.

Failure to obtain marketing approval for a product candidate will prevent us or our collaborators from commercializing the product candidate.

We have not received approval to market ridinilazole or any other product candidate from regulatory authorities in any jurisdiction.

We have only limited experience in filing and supporting the applications necessary to obtain marketing approvals for product candidates and expect to rely on third-party contract research organizations to assist us in this process.

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Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities.

Regulatory authorities may determine that ridinilazole or any of our other product candidates are not effective or only moderately effective, or have undesirable or unintended side effects, toxicities, safety profiles or other characteristics that preclude us from obtaining marketing approval or that prevent or limit commercial use.

Regulatory authorities may determine that ivonescimab or any of our other product candidates are not effective or only moderately effective, or have undesirable or unintended side effects, toxicities, safety profiles or other characteristics that preclude us from obtaining marketing approval or that prevent or limit commercial use.

The process of obtaining marketing approvals is expensive, may take many years, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved.

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If we experience delays in obtaining approval or if we fail to obtain approval of our product candidates, the commercial prospects for our product candidates may be harmed and our ability to generate revenues will be materially impaired.

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

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

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

Our failure to obtain marketing approval in foreign jurisdictions would prevent our product candidates from being marketed in these other jurisdictions, and any approval we are granted for our product candidates in the United States and Europe would not assure approval of our product candidates in other jurisdictions.

In order to market and sell ridinilazole and our other product candidates in foreign jurisdictions, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements in those jurisdictions.

procedure varies among countries and can involve additional testing.

In order to market and sell ivonescimab and our other product candidates in foreign jurisdictions, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements in those jurisdictions.

The approval procedure varies among countries and can involve additional testing.

The time required to obtain approval may differ from that required to obtain FDA or EMA approval.

The regulatory approval process outside the United States and Europe generally includes all of the risks associated with obtaining FDA and EMA approval.

The regulatory approval process outside the United States and Europe generally

includes all of the risks associated with obtaining FDA and EMA approval.

In addition, some countries outside the United States and Europe require approval of the sales price of a drug before it can be marketed.

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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.

Even if we, or a third-party collaborator, obtain conditional approval for ridinilazole for the treatment of CDI, or any other product candidate, we or they may not be able to renew such conditional approval.

Even if we, or a third-party collaborator, obtain conditional approval for ivonescimab, or any other product candidate, we or they may not be able to renew such conditional approval.

Even if we obtain marketing approvals for our product candidates, the terms of approvals and ongoing regulation of our products may limit how we manufacture and market our products and compliance with such requirements may involve substantial resources, which could materially impair our ability to generate revenue.

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Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to continual requirements of and review by the FDA and other regulatory authorities.

These requirements include, but are not limited to, restrictions governing promotion of an approved product, submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMP requirements relating to manufacturing, quality control, quality assurance and corresponding

maintenance of records and documents, and requirements regarding the distribution of samples to physicians and recordkeeping.

These requirements include, but are not limited to, restrictions governing promotion of an approved product, submissions of safety and other post-marketing information and reports, registration and

listing requirements, cGMP requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, and requirements regarding the distribution of samples to physicians and recordkeeping.

The FDA and other federal and state agencies, including the Department of Justice, or DOJ, closely regulate compliance with all requirements governing prescription drug products, including requirements pertaining to marketing and promotion of drugs in accordance with the provisions of the approved labeling and manufacturing of products in accordance with cGMP requirements.

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Similarly, failure to comply with the European Union’s requirements regarding the protection of personal information can also lead to significant penalties and sanctions.

Fast track designation by the FDA may not actually lead to a faster development or regulatory review or approval process.

If a drug is intended for the treatment of a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical need for this condition, the drug sponsor may apply for FDA fast track designation.

The FDA has granted fast track designation for ridinilazole.

However, a fast-track designation does not ensure that ridinilazole will receive marketing approval or that approval will be granted within any particular timeframe.

We may also seek fast track designation for other product candidates.

Even if the FDA grants fast track designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures.

In addition, the FDA may withdraw fast track designation if it believes that the designation is no longer supported by data from our clinical development program.

Fast track designation alone does not guarantee qualification for the FDA’s priority review procedures.

Priority review designation by the FDA may not lead to a faster regulatory review or approval process and, in any event, does not assure FDA approval of our product candidates.

If the FDA determines that a product candidate offers major advances in treatment or provides a treatment where no adequate therapy exists, the FDA may designate the product candidate for priority review.

A priority review designation means that the goal for the FDA to review an application is six months, rather than the standard review period of ten months.

Because the FDA

designated ridinilazole as a qualified infectious disease product, or QIDP, ridinilazole will receive priority review.

We may also request priority review for other product candidates.

The FDA has broad discretion with respect to whether or not to grant priority review status to a product candidate, so even if we believe a particular product candidate is eligible for such designation or status, the FDA may decide not to grant it.

Moreover, a priority review designation does not necessarily mean a faster regulatory review process or necessarily confer any advantage with respect to approval compared to conventional FDA procedures.

Receiving priority review from the FDA does not guarantee approval within the six-month review cycle or thereafter.

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

Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription of any product candidates, including ridinilazole, for which we obtain marketing approval.

Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription of any product candidates, including ivonescimab, for which we obtain marketing approval.

Our future arrangements with customers, healthcare providers and professionals and third-party payors may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our products for which we obtain marketing approval.

Restrictions under applicable federal and state healthcare laws and regulations, include, and are not limited to, the following:

• The federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federally funded healthcare programs such as Medicare and Medicaid.

payment may be made under federally funded healthcare programs such as Medicare and Medicaid.

This statute has been broadly interpreted to apply to manufacturer arrangements with prescribers, purchasers and formulary managers, among others.

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Payments made to physicians and research institutions for clinical trials are included within the ambit of this law.

Failure to submit timely, accurate and required information for all payments, transfers of value and ownership or investment interests may result in civil monetary penalties.

• Analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and 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 drug manufacturers to report information related to payments to physicians and other health care providers or marketing expenditures.

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It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations.

government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations.

If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations.

Exclusion, suspension and debarment from government funded healthcare programs would significantly impact our ability to commercialize, sell or distribute any drug.

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We expect that current laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we, or any future collaborators, may receive for any approved products.

In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the ACA.

Among the provisions of the ACA of potential importance to our business and our product candidates are the following:

• an annual, non-deductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents;

• an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;

• expansion of healthcare fraud and abuse laws, including the civil False Claims Act and the federal Anti-Kickback Statute, new government investigative powers and enhanced penalties for noncompliance;

• a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (and 70% as of January 1, 2019) point-of-sale discounts off negotiated prices;

• extension of manufacturers’ Medicaid rebate liability;

• expansion of eligibility criteria for Medicaid programs;

• expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;

• new requirements to report certain financial arrangements with physicians and teaching hospitals;

• a new requirement to annually report drug samples that manufacturers and distributors provide to physicians;

• a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

In addition, other legislative changes have been proposed and adopted since the ACA was enacted.

These changes include the Budget Control Act of 2011, which, among other things, led to aggregate reductions to Medicare payments to providers of up to 2% per fiscal year that started in 2013 and, due to subsequent legislative amendments to the statute, will stay in effect through 2029 unless additional congressional action is taken, and the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several types of providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

These new laws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any of our product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.

Further, there have been several recent U.S.

congressional inquiries and proposed state and federal legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products.

Since enactment of the ACA, there have been, and continue to be, numerous legal challenges and Congressional actions to repeal and replace provisions of the law.

For example, with enactment of the Tax Cuts and Jobs Act of 2017, which was signed by President Trump on December 22, 2017, Congress repealed the “individual mandate.” The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, became effective in 2019.

Additionally, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminates the health insurer tax.

Further, the Bipartisan Budget Act of 2018, among other things, amended the ACA, effective January 1, 2019, to increase from 50 percent to 70 percent the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.” The Congress may consider other legislation to revise or replace elements of the ACA during the next Congressional session, whether in response to pending high court decisions or at its own initiative to amend or supplement the ACA.

It is unclear how ongoing litigation

and other efforts to amend the ACA will impact the ACA and our business.

Litigation and legislation over the ACA are likely to continue, with unpredictable and uncertain results.

We expect that these healthcare reforms, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure on the price that we receive for any approved product and/or the level of reimbursement physicians receive for administering any approved product we might bring to market.

We expect that recently enacted healthcare reforms, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure on the price that we receive for any approved product and/or the

level of reimbursement physicians receive for administering any approved product we might bring to market.

Reductions in reimbursement levels may negatively impact the prices we receive or the frequency with which our products are prescribed or administered.

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The costs of prescription pharmaceuticals has also been the subject of considerable discussion in the United States.

To date, there have been several recent U.S.

To date, there have been several U.S.

congressional inquiries and proposed and enacted state and federal legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products.

For example, the Trump administration’s budget proposal for fiscal year 2021 had included a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs.

It remains unclear the extent which the Biden administration and the new session of Congress will seek new legislative and/or administrative measures to control drug costs.

More recently, in August 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the "IRA").

Among other things, the IRA has multiple provisions that may impact the prices of drug products that are both sold into the Medicare program and throughout the United States.

Starting in 2023, a manufacturer of a drug or biological product covered by Medicare Parts B or D must pay a rebate to the federal government if the drug product’s price increases faster than the rate of inflation.

This calculation is made on a drug product by drug product basis and the amount of the rebate owed to the federal government is directly dependent on the volume of a drug product that is paid for by Medicare Parts B or D.

Additionally, starting in payment year 2026, the U.S.

Centers for Medicare and Medicaid Services ("CMS"), will negotiate drug prices annually for a select number of single source Part D drugs without generic or biosimilar competition.

CMS will also negotiate drug prices for a select number of Part B drugs starting for payment year 2028.

If a drug product is selected by CMS for negotiation, it is expected that the revenue generated from such drug will decrease.

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.

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

The Committee on Foreign Investment in the United States (“CFIUS”) or other regulatory agencies may modify, delay or prevent the transactions contemplated by the License Agreement.

The Committee on Foreign Investment in the United States (“CFIUS”) has authority to review direct or indirect foreign investments in U.S.

Among other things, CFIUS is empowered to require certain foreign investors to make mandatory filings, to charge filing fees related to such filings and to self-initiate national security reviews of foreign direct and indirect investments in U.S.

companies if the parties to that investment choose not to file voluntarily.

In the case that CFIUS determines an investment to be a threat to national security, CFIUS has the power to unwind or place restrictions on the investment.

Whether CFIUS has jurisdiction to review an acquisition or investment transaction depends on, among other factors, the nature and structure of the transaction, including the level of beneficial ownership interest and the nature of any information or governance rights involved.

For example, investments that result in “control” of a U.S.

business by a foreign person always are subject to CFIUS jurisdiction.

CFIUS’s expanded jurisdiction under the Foreign Investment Risk Review Modernization Act of 2018 and implementing regulations that became effective on February 13, 2020 further includes investments that do not result in control of a U.S.

business by a foreign person but afford certain foreign investors certain information or governance rights in a U.S.

business that has a nexus to “critical technologies,” “critical infrastructure” and/or “sensitive personal data”.

We believe that no mandatory filing was required in connection with the License Agreement but we have not yet determined whether we will make a voluntary filing.

CFIUS may decide to modify or delay our proposed business combination, impose conditions with respect to such business combination, request the President of the United States to order us to divest all or a portion of the assets we acquired without first obtaining CFIUS approval or prohibit the License Agreement entirely.

If it is determined that a mandatory filing was required to be made, it is possible that a material penalty could be assessed against the Company.

Risks Related to Our Intellectual Property, Cybersecurity and Data Privacy

If we are unable to obtain and maintain patent protection for our technology and product candidates, or if the scope of our patent protection is not sufficiently broad, our competitors could develop and commercialize technology and drug products similar or identical to ours, and our ability to successfully commercialize our technology and drug product candidates may be impaired.

Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our proprietary technology and products, including our Discuva Platform.

Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our proprietary technology and products.

We seek to protect our proprietary position by filing patent applications in the United States, in Europe and in certain additional foreign jurisdictions related to our novel technologies and product candidates that are important to our business.

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Therefore, in these circumstances, these patents and applications may not be prosecuted or enforced in a manner consistent with the best interests of our business.

For example, while under the collaboration and license agreement with Akeso for ivonescimab, we have the right, after a set period of time, to take control of the prosecution, maintenance and enforcement of certain patent applications licensed under the agreement in the License Territory, prosecution is subject to consultation and cooperation with Akeso, except with regard

to patent extension.

If the parties cannot align this could impact patentability of the licensed intellectual property.

Additionally, as actions or statements during prosecution in other territories (i.e., the non-License Territory) can impact the validity of any patent obtained in the License Territory, Akeso prosecution of its patent applications in the non-License Territory, can have an impact on patent prosecution and validity of applications/patents that we are prosecuting, maintaining or enforcing in the License Territory.

Additionally, Akeso owned patents and patent applications, non-exclusively licensed to Summit under the agreement, are under the control of Akeso, Akeso's prosecution and/or licensing strategies with regard to these patents and/or patent application may impact our business.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation.

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patent applications, or that we were the first to file for patent protection of such inventions outside the United States or, since March 16, 2013, within the United States.

Moreover, we may be subject to a third party preissuance submission of prior art to the U.S.

Patent and Trademark Office, or the USPTO, or become involved in opposition, derivation, reexamination, reissue, inter parties review, post grant review, interference proceedings or other patent office proceedings, court litigation or International Trade Commission proceedings, in the United States or elsewhere, challenging our patent rights or the patent rights of others.

Moreover, we may be subject to a third party pre-issuance submission of prior art to the USPTO or become involved in opposition, derivation, reexamination, reissue, inter parties review, post grant review, interference proceedings or other patent office proceedings, court litigation or International Trade Commission proceedings, in the United States or elsewhere, challenging our patent rights or the patent rights of others.

An adverse determination in any such submission, proceeding or litigation concerning our patent rights could reduce the scope of or prevent the enforceability of, or invalidate, our patent rights, allowing third parties to commercialize our technology or products, or equivalent or similar technology or products, and so to compete directly with us, without payment to us, or, where such proceedings involve third-party patents, result in our inability to manufacture or commercialize products without infringing third-party patent rights.

In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened or narrowed by operation of any of the foregoing, such an event could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.

Competitors may have filed patent applications or received patents and may obtain additional patents and proprietary rights that block or compete with our patents.

This could require us to design around the claims of patents covering our products that may have been issued by our competitors or obtain a license, either of which would could cause us to incur additional expenses.

We may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.

Third parties may have filed patent applications or received patents and may obtain additional patents and proprietary rights that block or compete with our patents.

Resolving an intellectual property infringement claim can be costly and time consuming and may require Summit to design around the claims of patents covering our products that may have been issued by third parties or to obtain a license, either of which would could cause us to incur additional expenses.

Summit cannot guarantee that it would be able to obtain license agreements on commercially reasonable terms.

A successful claim of patent or other intellectual property infringement could subject Summit to significant damages or an injunction preventing the manufacture, sale, or use of the affected product We may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.

Even if our patent applications issue as patents, they may not issue in a form that will provide us with adequate protection to prevent competitors from competing with us or otherwise to provide us with any competitive advantage.

Our competitors may be able to circumvent our owned or licensed patents by developing similar, improved or alternative technologies or products in a non-infringing manner.

For example, although ridinilazole is protected by a U.S.

composition of matter patent that recites hydrated forms of ridinilazole, and a method of treatment patent for Clostridioides difficile associated disease, patent protection is not available for composition-of-matter claims that only recite the active pharmaceutical ingredient for ridinilazole without limitation to its use.

Because ridinilazole lacks composition-of-matter protection for its active pharmaceutical ingredient, competitors will, subject to obtaining marketing approval, be able to offer and sell products with the same active pharmaceutical ingredient so long as these competitors do not infringe any other issued patents that would otherwise cover the drug’s usage, methods of treatment using the drug, drug formulations, drug dosage forms and the like.

Moreover, method-of-treatment patent claims are more difficult to enforce than composition-of-matter claims for reasons including off-label sale, potential divided infringement issues and use of the subject compound in non-infringing manners.

Physicians are permitted to prescribe an approved product for uses that are not described in the product’s labeling.

Although off-label prescriptions may infringe our method-of-treatment patents, the practice is common across medical specialties and such infringement is difficult to prevent or prosecute.

Off-label sales would limit our ability to generate revenue from the sale of our product candidates, if approved for commercial sale.

In addition, if a third party were able to design around our dosage-form and formulation patents and create a different formulation and dosage form that is not covered by our patents or patent applications, we would likely be unable to prevent that third party from manufacturing and marketing its product.

In addition, other companies may attempt to circumvent any regulatory data protection or market exclusivity, such as orphan drug exclusivity in the United States, which we obtain under applicable legislation, which may require us to allocate significant resources to preventing such circumvention.

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Such developments could enable other companies to use our clinical trial data to assist in their own product development and to obtain marketing authorizations in the European Union and in other jurisdictions.

Such developments may also require us to allocate significant resources to prevent other companies from circumventing or violating our intellectual property rights.

Such developments may also require us to

allocate significant resources to prevent other companies from circumventing or violating our intellectual property rights.

Our attempts to prevent third parties from circumventing our intellectual property and other rights may ultimately be unsuccessful.

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Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture, market and sell our product candidates and use our proprietary technologies, including our Discuva Platform, without infringing the intellectual property and other proprietary rights of third parties.

Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture, market and sell our product candidates and use our proprietary technologies, including our in-licensed drug candidate ivonescimab, without infringing the intellectual property and other proprietary rights of third parties.

There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries, and we may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our products and technology, including interference, derivation, inter parties review, reexamination, reissue or post-grant review proceedings before the USPTO.

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Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable.

In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets.

If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us.

If any of our trade secrets, particularly unpatented know-how, were to be obtained or independently developed by a competitor, our competitive position would be harmed.

We are exposed to risks related to cybersecurity threats, which could result in a material disruption of our product development programs.

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

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

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

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

If our information technology systems or data, or those of third parties upon whom we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including, but not limited to, regulatory investigations and actions;

litigation (including class claims);

fines and penalties;

a disruption of our business operations such as our clinical trials;

reputational harm;

loss of revenue and profits;

and other adverse consequences.

In the ordinary course of our business, we (and third parties upon whom we rely) may collect, receive, store, use, transfer, make accessible, protect, secure, dispose of, transmit, disclose or otherwise process proprietary, confidential and sensitive information (including personal data (such as health-related data and participant study related data), intellectual property, and trade secrets (collectively, sensitive data).

In addition, we rely on service providers to establish and maintain appropriate information

technology and data security protections over the information technology systems they provide to us to operate our critical business systems (such as cloud-based infrastructure and systems, personnel email, as well as data storage and management systems).

However, except for contractual protections, we have limited ability to control their safeguards and actions related to such matters and these service providers may not maintain adequate information security measures.

We may share or receive sensitive data with or from third parties whose information security measures may not be adequate.

In particular, the COVID-19 pandemic has caused us to modify our information technology practices including that our employees may work remotely which increases the risk of data breaches.

Additionally, the prevalent use of mobile devices that access our sensitive data increases the risk of data breaches.

Our information technology systems, including in our remote work environment, and those of parties upon which we rely, are vulnerable to evolving threats.

These threats are prevalent, continue to increase and come from a variety of sources such as “hackers;” external or internal bad actors;

personnel (such as through theft, error and/or misuse);

sophisticated nation states and nation-state-supported actors;

These threats include, but are not limited to, social-engineering attacks, malicious code or intrusions, malware, denial-of-service attacks, personnel misconduct or errors, ransomware attacks, supply-chain attacks, software bugs, computer viruses, server malfunctions, software and hardware failures, theft or loss of data and other information technology assets, adware, natural disasters, terrorism, war, as well as telecommunication and electrical failures.

In particular, ransomware attacks are becoming increasingly prevalent and severe and can lead to significant disruptions to operations, loss of data and income, reputational harm and diversion of funds.

If we were to experience such an attack, extortion payments might alleviate some of the negative impacts of a ransomware attack but we might be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.

Any of these threats may result in unauthorized, unlawful or accidental loss, corruption, access, modification, destruction, alteration, acquisition or disclosure of sensitive data (such as clinical trial data).

The costs to us to attempt to protect against such breaches is significant and could potentially require us to modify our business (including non-clinical and clinical trial activities).

While we have implemented security measures designed to protect our information technology systems and to identify and remediate potential vulnerabilities, such measures may not be successful.

We may not be able to detect vulnerabilities in our information technology systems because such threats and techniques used by threat actors change frequently, are sophisticated in nature and may not be detected until after a security incident has occurred.

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

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

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

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

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

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

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

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

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

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

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

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

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

While we continue to assess and address the implications of existing and new domestic and foreign regulations relating to data privacy, the evolving regulatory landscape presents a number of legal and operational challenges, and our efforts to comply with these regulations may be unsuccessful.

For example, European Union ("EU") regulations have established a prohibition on the transfer of personally identifiable information from the EU to other countries whose laws do not protect personal data to an adequate level of privacy or security.

While we have utilized certain permitted approaches for transferring personally identifiable information from the EU to the United States, these approaches may be reviewed and invalidated by EU courts or regulatory bodies and we may be required to ascertain an alternative legal basis for such transfers.

Additionally, we may also face audits or investigations by one or more government agencies relating to our compliance with these regulations that could result in the imposition of penalties or fines, significant expenses in facilitating and responding to the investigations, and overall reputational harm or

negative publicity.

The costs of compliance with, and other burdens imposed by, these laws, regulations and policies including, restrictions on marketing activities, could have a material adverse effect on our business, financial condition and operating results.

If we or others upon whom we rely experience or are perceived to have experienced a breach, we may experience adverse consequences.

These consequences may include:

government enforcement actions (for example, investigations, fines, penalties, audits and inspections), interruptions in our operations (including disruptions to our clinical trials), interruptions or restrictions on processing sensitive data (which could result in delays in obtaining, or our inability to obtain, regulatory approvals and significantly increase our costs to recover or reproduce the sensitive data), reputational harm, litigation (including class-action claims), indemnification obligations, monetary fund diversions, financial loss and other harms.

In addition, such a breach may require notification of the breach to relevant stakeholders.

Such disclosures are costly and the disclosure or the failure to comply with such requirements could lead to adverse consequences.

Many of our contracts with relevant stakeholders include obligations relating to the safeguard of sensitive data and a breach could lead to claims against us by such stakeholders.

There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from liabilities, damages or claims relating to our data privacy and security obligations.

In addition, failure to maintain effective internal accounting controls related to data security breaches and cybersecurity in general could impact our ability to produce timely and accurate financial statements and could subject us to regulatory and private party scrutiny.

We are subject to stringent and changing obligations related to data privacy and security.

Our actual or perceived failure to comply with such obligations could lead to regulatory investigations and actions;

fines and penalties;

disruptions to our business operations;

reputational harm;

loss of revenue and profits;

and other adverse business impacts.

In the ordinary course of business, we process personal data and other sensitive data (including proprietary and confidential business information, trade secrets, intellectual property, clinical trial data, and other sensitive third-party data).

We are subject to or affected by numerous data privacy and security obligations such as various federal, state, local and foreign laws, regulations, and guidances;

industry standards;

external and internal privacy and security notices and policies;

and other obligations governing the processing of personal data by us and on our behalf.

These obligations may change, are subject to differing interpretations and may be inconsistent among jurisdictions.

The global data protection landscape is rapidly evolving and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future.

This evolution may create uncertainty in our business, affect us or our collaborators’, service providers’ and others’ ability to operate

in certain jurisdictions or to collect, store, transfer, use, share, and otherwise process personal data, necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us.

The cost of compliance with these obligations is high and is likely to increase in the future.

These obligations may necessitate changes to our information technologies, systems and practices and to those of any service providers that process personal data on our behalf.

In addition, these obligations may require us to change our business plans.

Outside the U.S., an increasing number of laws, regulations and industry standards apply to data privacy and security.

For example, the European Union’s General Data Protection Regulation (GDPR) (EU) 2016/679, or the EU GDPR, imposes strict requirements on the processing of personal data.

Under the EU GDPR, government regulators may impose temporary or definitive bans on personal data processing as well as fines of up to 20 million Euros or 4% of the annual global revenues of the noncompliant company, whichever is greater.

Additionally, the Personal Information Protection Law ("PIPL") of the People's Republic of China may apply to certain personal data processed by us, our collaborators or others on our behalf.

Similar to the EU GDPR, PIPL imposes strict requirements on the processing of personal data and allows for statutory fines and penalties.

Certain jurisdictions, including the United Kingdom, EU, and China have enacted data localization laws and cross-border personal data transfer laws which make it more difficult to transfer information across jurisdictions (such as transferring or receiving personal data that originates in the UK or in other foreign jurisdictions).

Existing mechanisms that facilitate cross-border personal data transfers may change or be invalidated.

The processing of sensitive personal data, such as physical health conditions, is a topic of active interest among regulators.

As we expand into countries and jurisdictions outside the U.S., we may be subject to additional laws and regulations that may affect how we conduct business in relation to the personal data we process.

For example, in relation to these cross-border personal data laws, if we cannot maintain a valid compliance mechanism for cross-border personal data transfers, we may face increased exposure to regulatory actions, fines and injunctions against the transferring of personal data from the UK, Europe, China and elsewhere.

We may have to increase our personal data processing capabilities and infrastructure in foreign jurisdictions at significant expense.

Likewise, we expect that there will continue to be new proposed laws, regulations and industry standards relating to data privacy and security in the U.S.

For example, the California Consumer Privacy Act, as amended, imposes obligations on business to which it applies.

These obligations include, but are not limited to, providing specific disclosures in privacy notices and affording California residents certain rights related to their personal data.

The CCPA allows for statutory fines for noncompliance (up to $7,500 per violation).

While the CCPA contains limited exceptions for clinical trial data, the CCPA’s implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future.

In addition, the CCPA, as amended, establishes a new California Privacy Protection Agency to implement and enforce the CCPA which could increase the risk of an enforcement action.

Other states (such as Colorado and Virginia) have also enacted data privacy laws.

If we become subject to new data privacy laws, at the state level, the risk of enforcement action against us could increase because we may become subject to additional obligations and the number of individuals or entities that can initiate actions against us may increase (including individuals, via a private right of action, and state actors).

Although we endeavor to comply with all applicable data privacy and security obligations, we may at times fail to do so or may be perceived to have failed to do so.

Moreover, despite our efforts, we may not be successful in achieving compliance if our personnel or third parties upon whom we rely fail to comply with such obligations, which could negatively impact our business operations and compliance posture.

For example, any failure by a service provider to comply with applicable data privacy and security obligations could result in adverse effects, including inability to operate our business and proceedings against us by governmental entities or others.

If we fail, or are perceived to have failed, to address or comply with data privacy and security obligations, we could face significant consequences.

These consequences may include, but are not limited to, government enforcement actions (e.g., investigations, fines, penalties, audits, inspections and similar activities);

litigation (including class-related claims);

additional reporting requirements and/or oversight;

bans on processing personal data;

orders to destroy or not use personal data;

and imprisonment of company officials.

Any of these events could have a material adverse effect on our reputation, business or financial condition, including but not limited to:

interruptions or stoppages in our business operations (including, as relevant, our clinical trials);

inability to process personal data or to operate in certain jurisdictions;

limited ability to develop or commercialize our products;

expenditure of time and resources to comply as well as to defend any claim or inquiry;

adverse publicity;

or revision or restructuring of our operations.

Moreover, trial participants or research subjects as well as the providers who share their information with us, may contractually limit our ability to use and disclose the information.

Risks Related to Corporate Governance and Employee Relations

Our future success depends on our ability to retain our chief executive officer and other key executives and to attract, retain and motivate qualified personnel.

We are highly dependent on the principal members of our executive and scientific teams, including Robert W.

Duggan, our Chief Executive Officer, and Dr.

Mahkam Zanganeh, our Chief Operations Officer.

Although we have formal employment agreements with some of our executive officers, these agreements do not prevent our executives from terminating their employment with us at any time.

Our future success depends on our ability to retain our Chief Executive Officer, our co-Chief Executive Officer, President and member of the Board and other key executives and to attract, retain and motivate qualified personnel.

We are highly dependent on the principal members of our executive and scientific teams, including Mr.

Duggan, our Executive Chairman and Chief Executive Officer, and Dr.

Mahkam Zanganeh, our co-Chief Executive Officer, President and member of the Board.

We do not have employment agreements with Mr.

Duggan or Dr.

They may terminate their employment with us at any time.

We do not maintain “key person” insurance on any of our executive officers.

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Duggan owns more than a majority of the voting power of our outstanding shares of common stock.

Under the Nasdaq Stock Market listing requirements, a company of which more than 50% of the voting power is held by an individual, group, or another company is a “controlled company.” We have in the past, and we expect in the future, to rely on the “controlled company” exemptions under the Nasdaq Stock Market listing requirements.

Under the Nasdaq Stock Market listing requirements, a company of which more than 50% of the voting power is held by an individual, group, or another company is a “controlled company”.

We have in the past, and we expect in the future, to rely on the “controlled company” exemptions under the Nasdaq Stock Market listing requirements.

For example, in the past, a majority of the members of our board of directors were not independent directors, and our compensation and nominating and corporate governance committees did not consist entirely of independent directors.

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regulatory authorities, report financial information or data accurately or disclose unauthorized activities to us.

Similar employee fraud or misconduct could occur with respect to reimbursement requests and other reports we are required to submit to BARDA.

Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation, or a request for the reimbursement of expenses that were not incurred, which could cause BARDA to terminate our

contract with them.

It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws, standards or regulations.

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• the success of competitive products or technologies;

• results of clinical trials of ridinilazole and any other product candidate that we develop;

• results of clinical trials of ivonescimab and any other product candidate that we develop;

• results of clinical trials of product candidates of our competitors;

• changes or developments in laws or regulations applicable to ridinilazole and any other product candidates that we develop;

• changes or developments in laws or regulations applicable to ivonescimab and any other product candidates that we develop;

• our entry into, and the success of, any collaboration agreements with third parties;

• the operation of our contract with BARDA, and whether BARDA elects to pursue its remaining option work segment beyond the base period;

• developments or disputes concerning patent applications, issued patents or other proprietary rights;

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• the other factors described in this “Risk Factors” section.

Additionally, the stock market historically has experienced significant price and volume fluctuations.

These fluctuations are often unrelated to the operating performance of particular companies.

These broad market fluctuations, such as those caused by the COVID-19 pandemic, may cause declines in the trading price and market value of our common stock.

Our shares of common stock do not trade on any exchange outside of the United States.

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Our principal stockholder and chief executive officer, Mr.

Duggan, holds a substantial

number of shares.

Duggan, holds a substantial number of shares.

Duggan’s shares have been registered for resale pursuant to an effective registration statement on Form S-3.

If he sells, or indicates an intention to sell, substantial amounts of shares in the public market, the trading price of our shares could decline.

sells, or indicates an intention to sell, substantial amounts of shares in the public market, the trading price of our shares could decline.

We are a “smaller reporting company” and the reduced disclosure requirements applicable to smaller reporting companies may make our shares of common stock less attractive to investors.

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This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.

We have received the requisite approvals and if the Board decides to proceed with the reverse stock split, it may decrease the liquidity of the shares of our common stock and could lead to a decrease in our overall market capitalization.

On January 6, 2023, the Company held a Special Meeting of Stockholders in which the stockholders approved:

(i) an amendment to the Company’s restated certificate of incorporation to increase the number of authorized shares of our common stock by 650,000,000 (from 350,000,000 to 1,000,000,000), and (ii) an amendment to authorize the Board to amend our restated certificate of incorporation to effect a reverse stock split of all of the outstanding shares of our common stock, at a ratio in the range of 1-for-5 to 1-for-10.

The Board reserves the right to adopt the proposal described in clause (ii) at any time prior to January 6, 2024.

The liquidity of the shares of our common stock may be affected adversely by such reverse stock split given the reduced number of shares of our common stock that will be outstanding following such reverse stock split, especially if the market price of our common stock does not increase as a result of such reverse stock split.

In addition, such reverse stock split may increase the number of stockholders who own odd lots (less than 100 shares) of our common stock, creating the potential for such stockholders to experience an increase in the cost of selling their shares of common stock and greater difficulty effecting such sales.

We expect that the proposed reverse stock split, if effected, will increase the per share trading price of our common stock.

However, the market price per share of our common stock after the reverse stock split may not rise (or remain constant) in proportion to the reduction in the number of shares of common stock outstanding before the reverse stock split.

We cannot predict the effect of the reverse stock split on the per share trading price of our common stock, and the history of reverse stock splits for other companies is varied, particularly since some investors may view a reverse stock split negatively.

Our total market capitalization after the reverse stock split, if approved and effective, may be lower than our total market capitalization before the reverse stock split.

If our common stock trades below $1.00, we may fail to meet the continued listing requirements of the Nasdaq Global Market and our common stock may be delisted.

Our common stock is subject to certain continued listing standards set by the Nasdaq Global Market, including a requirement to maintain a minimum bid price of at least $1.00 per share.

If our common stock fails to meet such standards, it could be delisted from the Nasdaq Global Market.

This would have a negative impact on the liquidity of our common stock.

Our restated certificate of incorporation designates the Court of Chancery of the State of Delaware and the federal district courts of the United States of America as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers and employees.

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In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our restated certificate of incorporation.

This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

This may require

significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

These exclusive forum provisions may limit the ability of our stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with us or our directors, officers or employees, which may discourage such lawsuits against us and our directors, officers and employees.

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Exchange rate fluctuations between local currencies and the U.S.

create risk in several ways, including the following:

dollar create risk in several ways, including the following:

weakening of the U.S.

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The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business, cause the market price of our shares of common stock to decline and delay the development of our product candidates.

Risks Related to the COVID-19 Pandemic

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

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

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

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

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

Changes in flexible working arrangements

could impact employee retention, employees' productivity and morale, strain our technology resources and introduce operational risks.

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

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

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

We have previously experienced, and may experience in the future, patient enrollment at clinical trial sites at a slower pace than expected.

Our ability to undertake clinical trials may be adversely affected, directly or indirectly, by the COVID-19 pandemic.

While it is not possible at this time to estimate the entirety of the continued impact the COVID-19 pandemic will have on our business, operations, employees, customers, suppliers or collaboration partners, continued spread of COVID-19, measures taken by governments, actions taken to protect employees and the broad impact of the pandemic on all business activities may materially and adversely affect our business, supply chain, results of operations and financial condition.

Unresolved Staff Comments

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

What changed 10-K

Item 1A. Risk Factors