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Item 1A. Risk Factors

2024-03-07 compared with 2023-03-30 · 370 added, 480 removed, 267 unchanged (76% of the section changed)

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Each of these risk factors, as well as additional risks not presently known to us or that we currently deem immaterial, could adversely affect our business, operating results, growth prospects or financial condition, as well as the trading price of our common stock, in which case you may lose all or part of your investment.

Risks Related to Development and Commercialization of our Product Candidate

We are substantially dependent upon the clinical, regulatory, and commercial success of our sole product candidate, molgramostim nebulizer solution (molgramostim).

If we are unable to successfully complete clinical development of, obtain regulatory approval for, and successfully commercialize molgramostim, our business may be harmed.

The success of our business is dependent on our ability to advance the clinical development of our sole product candidate, molgramostim for the treatment of patients with aPAP.

To date, we have never obtained regulatory approvals for or commercialized a product candidate, and we may never be able to develop a marketable product.

We are devoting, and expect to continue to devote, substantially all our efforts and financial resources to the development of molgramostim for aPAP, including clinical trials, regulatory approval, and, if approved, commercialization.

Our business depends heavily on the successful completion of clinical development and subsequent regulatory approval of molgramostim for aPAP.

We are conducting IMPALA-2, a global Phase 3 pivotal trial designed to compare the efficacy and safety of molgramostim 300 µg administered once daily by inhalation with matching placebo in patients with aPAP.

There can be no assurance that the IMPALA-2 pivotal trial will demonstrate with statistical significance that molgramostim is effective for the proposed indication compared to placebo or that it will establish adequate safety.

Any failure to do so would adversely impact the potential for regulatory approval of molgramostim.

Even if molgramostim demonstrates a statistically significant difference compared to placebo for the primary endpoint, we may not be able to demonstrate differences for our secondary endpoints.

Additionally, clinical trial data frequently are susceptible to varying interpretations.

Although we may believe the trial demonstrates promising results, regulatory authorities may analyze or weigh trial data differently, resulting in delay or failure to obtain marketing approval or a requirement to conduct confirmatory studies.

We are not permitted to commercialize molgramostim in the U.S.

until we receive approval of a BLA, or in any other country until we receive the requisite approvals from the appropriate regulatory authorities.

Failure to obtain such approvals could impair our ability to generate revenues from the product candidate, which would have a material adverse effect on our business, operating results, growth prospects or financial condition, as well as the trading price of our common stock.

Given the developmental nature of our product candidate, we are subject to risks associated with initiating, completing, and achieving positive outcomes from our current and future clinical trials, including:

• slow implementation, enrollment, and completion of the clinical trials;

• inability to enroll enough patients in the clinical trials;

• low patient compliance and adherence to dosing and reporting requirements, for example, incomplete reporting of patient reported outcomes in the clinical trials or missed doses;

• lack of safety and efficacy in the clinical trials;

• delays in manufacture of supplies for both drug and device components due to delays in formulation, process development, or manufacturing activities;

• requirements for additional nonclinical or clinical trials based on changes to formulation and/or changes to regulatory requirements;

• poor quality or missing data from the clinical trials.

If we successfully complete the necessary clinical trials for our product candidate, our success will be subject to the risks associated with obtaining regulatory approvals, product launch, and commercialization, including:

• rejection of our regulatory submissions for our product candidate by the FDA or other regulatory authorities;

• delays during regulatory review and/or requirements of additional chemistry, manufacturing, and controls, nonclinical, or clinical studies, resulting in increased costs and/or delays in marketing approval and subsequent commercialization of the product candidate in the U.S.

and other markets;

• inability to consistently manufacture commercial supplies of drug and delivery devices resulting in slowed market development and lower revenue;

• poor commercial sales due to:

o the inability of our future sales organization or our potential commercialization partners to effectively sell the product candidate;

o our lack of success in educating physicians and patients about the benefits, administration, and use of our product candidate;

o the availability, perceived advantages, relative cost, relative safety, and relative efficacy of other products or treatments for the targeted indications of the product candidate;

o low patient demand for the product candidate;

o poor prescription coverage and inadequate reimbursement for our product candidate;

o our inability to enforce our intellectual property rights in our product candidate;

o reduction in the safety profile of our product candidate following approval.

Many of these clinical, regulatory, and commercial matters are beyond our control and are subject to other risks described elsewhere in this Item 1A, Risk Factors section.

Accordingly, we cannot assure that we will be able to advance our product candidate further through final clinical development, or obtain regulatory approval of, commercialize, or generate significant revenue.

If we cannot do so, or are significantly delayed in doing so, our business will be materially harmed.

Clinical drug development involves a lengthy and expensive process, with an uncertain outcome.

We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development of our product candidate.

If development of our product candidate is unsuccessful or delayed, we may be unable to obtain required regulatory approvals and be unable to commercialize our product candidate on a timely basis, if at all.

Pharmaceutical products are subject to stringent regulatory requirements covering quality, safety, and efficacy.

Only after successfully completing extensive pharmaceutical development, nonclinical testing, and clinical trials may a product be considered for regulatory approval.

Clinical trials are expensive, difficult to design and implement, the outcome is inherently uncertain, and failure or delay may occur at any time.

We may experience a number of unforeseen events that cause our clinical trials not commence or not be completed on schedule, if at all.

Clinical trials can be delayed for a variety of reasons, including:

• inability to raise sufficient funding to initiate or continue a clinical trial;

• delays in obtaining regulatory approval to commence or extend a clinical trial;

• delays in identifying and reaching agreement on acceptable terms with prospective CROs, clinical trial sites, and investigators, which agreements can be subject to extensive negotiation and may vary significantly among trial sites;

• delays in obtaining regulatory approval in a prospective country;

• delays in obtaining ethics committee approval to conduct or extend a clinical trial at a prospective site;

• delays in reaching agreements on acceptable terms with prospective CMOs or other vendors for the production and supply of clinical trial material and, if necessary, drug administration devices, which agreements can be subject to extensive negotiation;

• delays in the production or delivery of sufficient quantities of clinical trial material or drug delivery devices from our CMOs and other vendors to initiate or continue a clinical trial;

• delays in distributing clinical trial material due to import restrictions or licenses in target countries;

• delays due to product candidate recalls as the result of stability failure, excessive product complaints, or other failures of the product candidate during its use or testing;

• invalidation of clinical data caused by premature unblinding or integrity issues;

• invalidation of clinical data caused by mixing up of the active drug and placebo through randomization or manufacturing errors;

• delays on the part of our CROs, CMOs, and other third-party contractors in developing procedures and protocols or otherwise conducting activities in accordance with applicable policies and procedures and in accordance with agreed upon timelines;

• delays in identifying and hiring or engaging, as applicable, additional employees or consultants to assist in managing clinical trial-related activities;

• delays in recruiting and enrolling individuals to participate in a clinical trial, which historically can be challenging in orphan diseases;

• delays caused by patients dropping out of a clinical trial due to side effects, concurrent disorders, difficulties in adhering to the trial protocol, unknown issues related to different patient profiles than in previous trials, or otherwise;

• delays in having patients complete participation in a clinical trial;

• delays resulting from clinical trial sites dropping out of a trial, providing inadequate staff support for the trial, problems with shipment of trial supplies to clinical sites, or focusing its staff’s efforts on enrolling trials that compete for the same patient population;

• suspension of enrollment at a trial site or the imposition of a clinical hold by the FDA or other regulatory authority following an inspection of clinical trial operations at trial sites or finding of a drug-related serious adverse event;

• delays in quality control/quality assurance procedures necessary for trial database lock and analysis of unblinded data;

• delays, inconsistencies, or negative results in statistical analyses of clinical trial data;

• delays in enrollment and the treatment of patients caused by global health risks;

• delays due to supply chain disruptions as a result of global health risks, international conflict, or other unexpected event.

Clinical trials may not begin on time or be completed in the time frames we anticipate and may be costlier than we anticipate for a variety of reasons, including one or more of those described above.

The length of time necessary to successfully complete clinical trials vary significantly and is difficult to predict accurately.

We may make statements regarding anticipated timing for completion of enrollment in and/or availability of results from our clinical trials, but such predictions are subject to a number of significant assumptions and actual timing may differ materially for a variety of reasons, including patient enrollment rates, length of time needed to prepare raw trial data for analysis and then to review and analyze it, and other factors described above.

If we experience delays in the completion of a clinical trial, if a clinical trial is terminated, or if failure to conduct a trial in accordance with regulatory requirements or the trial’s protocol leads to deficient safety and/or efficacy data, the regulatory approval and/or commercial prospects for our product candidate may be harmed, and our ability to generate product revenue will be delayed.

In addition, any delays in completing our clinical trials likely will increase our development costs.

Further, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials have in the past and may in the future ultimately lead to the denial of regulatory approval of a product candidate.

Even if we ultimately commercialize a product candidate, the standard of care may have changed or other therapies for the same indications may have been introduced to the market in the interim and may establish a competitive threat to us or diminish the need for our products.

Failure at any stage of clinical testing is not uncommon and we may encounter problems that would require additional, unplanned trials or cause us to abandon a clinical development program.

In addition, a clinical trial may be suspended or terminated by us, an IRB, a data safety monitoring board, the FDA, or other regulatory authorities due to a number of factors, including:

• lack of adequate funding to continue the trial;

• failure to conduct the trial in accordance with regulatory requirements or the trial’s protocol;

• inspection of clinical trial operations or sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;

• unforeseen safety issues, including adverse side effects;

• changes in governmental regulations or administrative actions.

Changes in governmental regulations and guidance relating to clinical trials may occur and we may need to amend clinical trial protocols to reflect these changes, or we may amend trial protocols for other reasons.

Amendments may require us to resubmit protocols to IRBs for re-examination and approval or renegotiate terms with CROs, clinical trial sites, and investigators, all of which may adversely impact the costs or timing of or our ability to successfully complete a trial.

Even if our clinical trials are completed, the results may not be sufficient to obtain regulatory approval for our product candidate.

There are significant risks that ongoing and future clinical trials of our product candidate will not be successful.

The results of preclinical and early clinical trials may not be predictive of the results of later-stage clinical trials, and the possible lack of standardization across multiple investigative sites may induce variability in the results which can interfere with the evaluation of treatment effects.

A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier clinical trials, and we cannot be certain that we will not face similar setbacks.

For example, the top line results from our IMPALA trial were released by us on June 12, 2019 and did not meet all of the statistical goals and protocol end points.

On October 1, 2019, we received a written response from the FDA in connection with a Type C meeting regarding the molgramostim development program for aPAP and results from IMPALA in which the FDA indicated that the data provided did not provide sufficient evidence of efficacy and safety for the treatment of aPAP.

Negative or inconclusive results could cause the FDA and other regulatory authorities to require us to repeat or conduct additional clinical trials, which could significantly increase the time and expense associated with development of that product candidate or cause us to elect to discontinue one or more clinical programs.

There is significant uncertainty regarding the regulatory approval process for any investigational new drug.

Substantial further testing and validation of our product candidate and related manufacturing processes may be required, and regulatory approval may be conditioned, delayed, or denied, any of which could delay or prevent us from successfully marketing our product candidate and substantially harm our business.

Regulatory approval is required before a pharmaceutical product can be commercially marketed and sold, and various federal and foreign statutes and regulations also govern or materially influence the manufacturing, safety, labeling, storage, record keeping, and marketing of pharmaceutical products.

The process of obtaining these approvals and the subsequent compliance with appropriate U.S.

and foreign statutes and regulations is time-consuming and requires the expenditure of substantial resources.

Significant uncertainty exists with respect to the regulatory approval process for any investigational new drug, including molgramostim.

Regardless of any guidance the FDA or foreign regulatory agencies may provide a drug’s sponsor during its development, the FDA or foreign regulatory agencies retain complete discretion in deciding whether to accept a BLA, or the equivalent foreign regulatory approval submission for filing or, if accepted, whether to approve a BLA.

There are many components to a BLA or marketing authorization application submission in addition to clinical trial data.

For example, the FDA or foreign regulatory agencies will review the sponsor’s internal systems and processes, as well as those of its CROs, CMOs, and other vendors, related to development of its product candidates, including those pertaining to its clinical studies and manufacturing processes.

Before accepting a regulatory approval submission for review or before approving such submission, the FDA or foreign regulatory agencies may request that we provide additional information that may require significant resources and time to generate, and there is no guarantee that our product candidate will be approved for any indication for which we may apply.

The FDA or foreign regulatory agencies may choose not to approve a BLA or its equivalent for a variety of reasons, including a decision related to the safety or efficacy data, manufacturing controls or systems, or for any other issues that the agency may identify related to the development of its product candidates.

Even if one or more Phase 3 clinical trials are successful in providing statistically significant evidence of the efficacy and safety of the investigational drug, the FDA or foreign regulatory agencies may not consider efficacy and safety data from the submitted trials adequate scientific support for a conclusion of effectiveness and/or safety and may require one or more additional Phase 3 or other trials prior to granting marketing approval.

If this were to occur, the overall development cost for the product candidate would be substantially greater and competitors may bring

products to market before us, which could impair our ability to generate revenues from the product candidate, or even seek approval, if blocked by a competitor’s Orphan Drug exclusivity, which would have a material adverse effect on our business, financial condition, and results of operations.

Further, development of our product candidate and/or regulatory approval may be delayed for reasons beyond our control.

Regulations or policies may be changed prior to submission of a marketing application that result in delays or require higher hurdles than currently anticipated.

These may occur as a result of drug scandals, recalls, or a political environment unrelated to our products.

For example, the FDA has granted molgramostim for aPAP Fast Track and BTD, which are each designed to expedite the development and review of certain drugs.

If there were a change in FDA policies and we were to lose those designations, it could cause delays in the regulatory review process.

Additionally, U.S.

federal government shut-downs or budget sequestrations, such as ones that occurred during January 2018 and December 2018 through January 2019, may result in significant reductions to the FDA’s budget, employees, and operations, which may lead to slower response times and longer review periods, potentially affecting our ability to progress development of our product candidate or obtain regulatory approval for our product candidate.

Even if the FDA or foreign regulatory agencies grant approvals for a product candidate, the conditions or scope of the approval(s) may limit successful commercialization of the product candidate and impair our ability to generate substantial sales revenue.

For example, molgramostim could be approved with restrictions for use only by patients unresponsive to the current standard of care or the FDA may approve label claims with age restrictions and/or treatment duration limitations.

The FDA may limit the label of molgramostim to a subset of patients based on a review of which patient groups had the greatest efficacious response in clinical trials.

Such label restriction may be undesirable and may limit successful commercialization.

The FDA or foreign regulatory agencies may also only grant marketing approval contingent on the performance of costly post-approval nonclinical or clinical studies, or subject to warnings or contraindications that limit commercialization.

Additionally, even after granting approval, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, and recordkeeping for our products will be subject to extensive and ongoing regulatory requirements.

These requirements include submissions of safety and other post-marketing information and reports, registration, and continued compliance with cGMP, good clinical practice ("GCP"), international conference on harmonization regulations, and good laboratories practice ("GLP"), which are regulations and guidelines that are enforced by the FDA or foreign regulatory agencies for all clinical development and for any clinical studies that we conduct post-approval.

The FDA or foreign regulatory agencies may decide to withdraw approval, add warnings, or narrow the approved indications in the product label, or establish risk management programs that could restrict distribution of our products.

These actions could result from, among other things, safety concerns, including unexpected side effects or drug interaction problems, or concerns over misuse of a product.

If any of these actions were to occur following approval, we may have to discontinue commercialization of the product, limit our sales and marketing efforts, implement risk minimization procedures, and/or conduct post-approval studies, which in turn could result in significant expense and delay or limit our ability to generate sales revenues.

Our molgramostim product candidate may cause undesirable side effects or adverse events or have other properties that could delay or prevent our clinical development, regulatory approval, or commercialization.

Undesirable side effects or adverse events caused by our molgramostim product candidate could interrupt, delay, or halt clinical trials and could result in the denial of regulatory approval by the FDA or other regulatory authorities for any or all indications, and in turn prevent us from commercializing our product candidate.

A significant challenge in clinical development is that the patient population in early trials, where small numbers of patients are required, is different from the patient population observed in later stage trials, where larger groups of patients are required.

As such, efficacy or safety results may differ significantly between trials.

If we fail to demonstrate the efficacy of our drug candidate or undesirable side effects occur, they could possibly prevent approval, which would have a material and adverse effect on our business.

If our product candidate receives marketing approval and we or others later identify undesirable side effects caused by the product:

• regulatory authorities may withdraw their approval of the product;

• regulatory authorities may require the addition of labeling statements, such as a boxed warning or a contraindication;

• we may be required to change the way the product is administered, conduct additional clinical trials, or change the labeling of the product;

• our reputation may suffer.

Any of these events could prevent us from achieving or maintaining market acceptance of the affected product or could substantially increase the costs and expenses of commercializing the product, which in turn could delay or prevent us from generating significant revenue from its sale.

Even if we receive regulatory approval for our product candidate, we may face regulatory difficulties that could materially and adversely affect our business, financial condition, and results of operations.

Even if initial regulatory approval is obtained, as a condition to the initial approval, the FDA or a foreign regulatory agency may impose significant restrictions on a product’s indicated uses or marketing or impose ongoing requirements for potentially costly post-approval studies or marketing surveillance programs, any of which would limit the commercial potential of the product.

Our molgramostim product candidate also will be subject to ongoing FDA requirements related to the manufacturing processes, labeling, packaging, storage, distribution, advertising, promotion, record-keeping, and submission of safety and other post-market information regarding the product.

For instance, the FDA may require changes to approved drug labels, require post-approval clinical studies, and impose distribution and use restrictions on certain drug products.

In addition, approved products, manufacturers, and manufacturers’ facilities are subject to continuing regulatory review and periodic inspections.

If previously unknown problems with a product are discovered, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, the FDA may impose restrictions on that product or us, including requiring withdrawal of the product from the market.

If we or a CMO of ours fail to comply with applicable regulatory requirements, a regulatory agency may:

• issue warning letters or enforcement letters;

• impose civil or criminal penalties;

• suspend or withdraw regulatory approval;

• suspend or terminate any ongoing clinical trials;

• refuse to approve pending applications or supplements to approved applications;

• exclude our product from reimbursement under government healthcare programs, including Medicaid or Medicare in the U.S.;

• impose restrictions or affirmative obligations on our or our CMO’s operations, including costly new manufacturing requirements;

• close the facilities of a CMO;

• seize or detain products that are deemed to be adulterated .

If our product candidate receives regulatory approval but fails to achieve significant market acceptance among the medical community, patients, or third-party payers, the revenue we generate from its sales will be limited and our business may never achieve profitability.

Our success will depend in substantial part on the extent to which our product candidate, if approved, is accepted by the medical community and patients and reimbursed by third-party payers, including government payers.

The degree of market acceptance with respect to our approved product, if any, will depend upon a number of factors, including:

• the safety and efficacy of our product as demonstrated in clinical trials;

• acceptance in the medical and patient communities of our product as a safe and effective treatment;

• the product’s taste, ease of use, or features associated with the delivery device;

• the perceived advantages of our product over alternative treatments, including with respect to the incidence and severity of any adverse side effects and the cost of treatment;

• the indications for which our product is approved;

• claims or other information (including limitations or warnings) in a product’s approved labeling;

• reimbursement and coverage policies of government and other third-party payers;

• pricing and cost-effectiveness of our product relative to alternative treatments;

• availability of alternative treatments;

• smaller-than-expected market size due to lack of disease awareness of a rare disease, or the patient population with a specific rare disease being smaller than anticipated;

• inappropriate diagnostic efforts due to limited knowledge and/or resources among clinicians;

• difficulties identifying patients;

• the prevalence of off-label substitution of chemically equivalent products or alternative treatments;

• the resources we devote to marketing our product and restrictions on promotional claims we can make with respect to the product.

We cannot predict with reasonable accuracy whether physicians, patients, healthcare insurers, health maintenance organizations, or the medical community in general, will accept or utilize our product, if approved.

If our product candidate is approved but does not achieve an adequate level of acceptance by these parties, we may not generate sufficient revenue to become or remain profitable.

In addition, our efforts to educate the medical community and third-party payers regarding benefits of our product may require significant resources and may never be successful.

If we determine that a product candidate may not achieve adequate market acceptance or that the potential market size does not justify additional expenditures on the program, we may reduce our expenditures on the development and/or the process of seeking regulatory approval of the product candidate while we evaluate whether and on what timeline to move the program forward.

Even if we receive regulatory approval to market our product candidate in the U.S., we may never receive approval or commercialize our product outside of the U.S., which would limit our ability to realize the full commercial potential of our product candidate.

In order to market products outside of the U.S., we must establish and comply with the numerous and varying regulatory requirements of other countries regarding safety and efficacy.

Approval procedures vary among countries and can involve additional product testing and validation and additional administrative review periods.

The time required to obtain approval in other countries generally differs from that required to obtain FDA approval.

The regulatory approval process in other countries may include all of the risks detailed above regarding FDA approval in the U.S., as well as other risks.

Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others.

Failure to obtain regulatory approval in other countries or any delay or setback in obtaining such approval could have the same adverse effects detailed above regarding FDA approval in the U.S.

As described above, such effects include the risks that our product candidate may not be approved for all indications requested, which could limit the uses of our product candidate and have an adverse effect on product sales, and that such approval may be subject to limitations on the indicated uses for which the product may be marketed or require costly, post-marketing follow-up trials.

Risks Related to Our Capital Requirements and Financial Condition

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Drug development is a highly speculative undertaking and involves a substantial degree of risk.

To date, we have not obtained any regulatory approvals for a product candidate, commercialized a product candidate, or generated any product revenue.

We have not obtained any regulatory approvals for a product candidate, commercialized a product candidate, or generated any product revenue.

We have devoted significant resources to research and development and other expenses related to our ongoing clinical trials and operations, in addition to acquiring product candidates.

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At December 31, 2023, we had an accumulated deficit of $393.4 million.

We expect to continue to incur substantial operating losses for the next several years as we seek to advance our molgramostim product candidate through clinical development (IMPALA-2 trial), global regulatory approvals, and commercialization.

We expect to continue to incur substantial operating losses for the next several years as we seek to advance our molgramostim product candidate through clinical development (IMPALA-2 pivotal trial), global regulatory approvals, and commercialization.

No revenue from operations will likely be available until, and unless, our current product candidate, molgramostim, is approved by the FDA or another regulatory agency and successfully marketed, or we enter into an arrangement that provides for licensing revenue or other partnering-related funding, outcomes which we may not achieve.

We are also continuously and critically reviewing our liquidity and anticipated capital requirements in light of the ongoing uncertainty created by the COVID-19 global pandemic.

We may require additional financing to obtain regulatory approval for molgramostim and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce, or terminate our product development efforts or other operations.

Since our Aravas subsidiary was formed in 2007, most of our resources have been dedicated to the development and acquisition of our product candidates, primarily molgramostim.

Our priority remains the continued development of molgramostim for the treatment of aPAP and continued progress in our Phase 3 trial.

Our priority remains the continued development of molgramostim for the treatment of aPAP and our IMPALA-2 pivotal trial.

We cannot estimate with reasonable certainty the actual amounts necessary to successfully complete the development and commercialization of our product candidate, and there is no certainty that we will be able to raise the necessary capital on reasonable terms or at all.

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• the costs involved in establishing, enforcing, or defending patent claims and other proprietary rights;

the continuing negative impacts of the ongoing COVID-19 pandemic and emerging variants.

• the continuing negative impacts of global health risks.

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

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In particular, due to the price per share of our common stock, any sale of our equity securities to raise significant capital would result in substantial ownership dilution to our stockholders.

If we raise additional capital through debt financing, it may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures, or subject to specified financial ratios, any of which could restrict our ability to develop and commercialize our product candidate or operate as a business.

If we raise additional capital through debt financing, it may be subject to

covenants limiting or restricting our ability to take specific actions, such as incurring additional debt or making capital expenditures, or subject to specified financial ratios, any of which could restrict our ability to develop and commercialize our product candidate or operate as a business.

Our loan agreement contains covenants which may adversely impact our business;

the failure to comply with such covenants could cause our outstanding debt to become immediately payable or accelerate principal payments.

We are a party to an Amended and Restated Loan and Security Agreement with Silicon Valley Bank (the “Loan Agreement”), pursuant to which we have pledged substantially all of our assets, other than our intellectual property (which is subject to a negative pledge).

The Loan Agreement includes a number of restrictive covenants, including restrictions on incurring additional debt, making investments, granting liens, disposing of assets, paying dividends, and redeeming or repurchasing capital stock, subject to certain exceptions.

We are a party to an Amended and Restated Loan and Security Agreement with Silicon Valley Bank, now a division of First Citizens Bank (the “Amended Loan Agreement”), pursuant to which we have pledged substantially all of our assets, other than our intellectual property (which is subject to a negative pledge).

The Amended Loan Agreement includes a number of restrictive covenants, including restrictions on incurring additional debt, making investments, granting liens, disposing of assets, paying dividends, and redeeming or repurchasing capital stock, subject to certain exceptions.

Collectively, these restrictive covenants could constrain our ability to grow our business through acquisitions or engage in other transactions.

In addition, the Loan Agreement includes covenants requiring, among other things, that we provide financial statements, comply with all laws, pay all taxes, and maintain insurance.

The Loan Agreement includes customary events of default, such as our failure to pay amounts due, our failure to comply with covenants, or the occurrence of an event that would reasonably be expected to have a material adverse event on our business.

Upon the occurrence and during the continuation of an event of default, Silicon Valley Bank could declare all outstanding loans under the Loan Agreement immediately due and payable and exercise remedies against us and the collateral.

The Amended Loan Agreement includes customary events of default, such as our failure to pay amounts due, our failure to comply with covenants, or the occurrence of an event that would reasonably be expected to have a material adverse event on our business.

Upon the occurrence and during the continuation of an event of default, Silicon Valley Bank could declare all outstanding loans under the Amended Loan Agreement immediately due and payable and exercise remedies against us and the collateral.

Such an event would have a material adverse effect on our liquidity, financial condition, operating results, business, and prospects and cause the price of our common stock to decline.

On March 10, 2023, the California Department of Financial Protection and Innovation closed Silicon Valley Bank, and the Federal Deposit Insurance Corporation ("FDIC") was appointed receiver.

The Company is monitoring the impact on its Loan Agreement.

Refer to Note 7.

Debt Facility of the consolidated financial statements in this annual report on Form 10-K for additional discussion.

Any future acquisitions that we make could disrupt our business and harm our financial condition.

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We may not be able to identify appropriate acquisition candidates or strategic partners, or successfully negotiate, finance, or integrate acquisitions of any businesses, products, or technologies.

Furthermore, the integration of any acquisition and management of any collaborative project may divert our management’s time and resources from our core business and disrupt our operations.

Any cash acquisition we pursue would diminish the funds otherwise available to us for other uses.

Any acquisition using our stock would dilute our stockholders’

ownership interests.

Any acquisition using our stock would dilute our stockholders’ ownership interests.

If we engage in acquisitions of companies, products, or technologies in order to execute our business strategy, we may need to raise additional capital.

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As of December 31, 2023, we had IPR&D of approximately $11.0 million.

Our intangible assets have been previously impaired and remain subject to additional impairment analyses whenever an event or change in circumstances indicates the carrying amount of such an asset may not be recoverable.

We test our goodwill, if any, and IPR&D for impairment annually, or more frequently if an event or change in circumstances indicates that the asset may be impaired.

If an impairment is identified, we would be required to record an impairment charge with respect to the impaired asset to our consolidated statements of operations and comprehensive loss.

A significant impairment charge could have a material negative impact on our financial condition and results of operations.

We will continue to evaluate our intangible assets for potential impairment in accordance with our accounting policies.

Events giving rise to impairment are difficult to predict and are an inherent risk in the pharmaceutical industry.

Some of the potential risks that could result in impairment of our IPR&D include negative clinical trial results, adverse regulatory developments, delay or failure to obtain regulatory approval, additional development costs, changes in the manner of our use or development of our product candidate, competition, earlier than expected loss of exclusivity, pricing pressures, higher operating costs, changes in tax laws, prices that third parties are willing to pay for our IPR&D or similar assets in an arm’s-length transaction being less than the carrying value of our IPR&D, and other market and economic environment changes or trends, such as the ultimate scope and scale of the COVID-19 global pandemic and the impact of COVID-19 on patient enrollment in our IMPALA-2 trial.

Some of the potential risks that could result in impairment of our IPR&D include negative clinical trial results, adverse regulatory developments, delay or failure to obtain regulatory approval, additional development costs, changes in the manner of our use or development of our product candidate, competition, earlier than expected loss of exclusivity, pricing pressures, higher operating costs, geopolitical conflicts, changes in tax laws, prices that third parties are willing to pay for our IPR&D or similar assets in an arm’s-length transaction being less than the carrying value of our IPR&D, and other adverse market and economic environment changes or trends.

Events or changes in circumstances may lead to significant impairment charges on our IPR&D in the future, which could materially adversely affect our financial condition and results of operations.

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Actual events involving limited liquidity, defaults, non-performance, or other adverse developments that affect financial institutions or other companies in the financial services industry, or the financial services industry generally, or concerns or rumors about any such events, have in the past and may in the future lead to market-wide liquidity problems.

For example, on March 10, 2023, Silicon Valley Bank was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver.

As of March 30, 2023, we had cash and cash equivalent balances on deposit with Silicon Valley Bank in excess of the FDIC insurance limitation of $250 thousand (“FDIC Limit”).

Our asset management account managed by Silicon Valley Bank is held in custody accounts at U.S.

Bank N.A., and we do not currently believe that our ability to access our marketable securities as needed will be affected by the closure of Silicon Valley Bank.

Department of the Treasury, Federal Reserve Board, and FDIC stated that all depositors of Silicon Valley Bank would have access to all of their money one business day following the date of closure;

we and other depositors with Silicon Valley Bank received such access on March 13, 2023.

Subsequently, FDIC Chairman Martin J.

Gruenberg has announced that all bank depositors, including deposits in excess of the FDIC Limit, with SVB will be fully protected.

However, uncertainty and liquidity concerns in the broader financial services industry remain.

Inflation and rapid increases in interest rates have led to a decline in the trading value of previously issued government securities with interest rates below current market interest rates.

Department of the Treasury, Federal Reserve Board, and FDIC have announced a program to provide up to $25 billion of loans to financial institutions secured by such government securities held by financial institutions to mitigate the risk of potential losses on the sale of such instruments.

However, widespread demands for customer withdrawals or other needs of financial institutions for immediate liquidity may exceed the capacity of the program.

There is no guarantee that the U.S.

Department of Treasury, Federal Reserve Board, and FDIC will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions in a timely fashion or at all.

Our access to our cash and cash equivalents in amounts adequate to finance our operations could be significantly impaired by the financial institutions with which we have arrangements directly facing liquidity constraints or failures.

For example, on March 10, 2023, the Federal Deposit Insurance Corporation ("FDIC") took control of Silicon Valley Bank, where the Company maintains depository accounts and has a debt facility, and created the National Bank of Santa Clara to hold the deposits of Silicon Valley Bank after Silicon Valley Bank was unable to continue its operations.

On March 27, 2023, First Citizens BancShares, Inc.

FCNCA) announced that it had entered into an agreement with the FDIC to purchase all of the assets and liabilities of Silicon Valley Bank and all bank deposits.

Although the failure of Silicon Valley Bank did not cause us to experience any material impacts on our financial condition or results of operations, our access to our cash and cash equivalents in amounts adequate to finance our operations could be significantly impaired if the financial institutions with which we have arrangements face liquidity constraints or failures.

In addition, investor concerns regarding the U.S.

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Any material decline in available funding or our ability to access our cash and cash equivalents could adversely impact our ability to meet our operating expenses, result in breaches of our contractual obligations, or result in violations of federal or state wage and hour laws, any of which could have material adverse impacts on our operations and liquidity.

Risks Related to Our Business Strategy and Operations

We are substantially dependent upon the clinical, regulatory, and commercial success of our product candidate, molgramostim.

Clinical drug development involves a lengthy and expensive process with an uncertain outcome, results of earlier studies and trials may not be predictive of future trial results, and our clinical trials may fail to adequately demonstrate to the satisfaction of regulatory authorities the safety and efficacy of our molgramostim product candidate.

The success of our business is dependent on our ability to advance the clinical development of molgramostim for the treatment of patients with aPAP.

Clinical development is expensive, can take many years to complete, and its outcome is inherently uncertain.

A failure of one or more of our clinical trials can occur at any time during the clinical trial process as demonstrated by the results of our IMPALA trial in 2019 and AVAIL trial in 2020.

The results of preclinical and early clinical trials of our product candidate may not be predictive of the results of later-stage clinical trials.

There is a high failure rate for drugs proceeding through clinical trials, and product candidates in later stages of clinical trials may fail to show the required safety and efficacy despite having progressed through preclinical and initial clinical trials.

Even if our clinical trials are completed, the results may not be sufficient to obtain regulatory approval for our product candidate.

slow implementation, enrollment, and completion of the clinical trials;

inability to enroll enough patients in the clinical trials;

low patient compliance and adherence to dosing and reporting requirements, for example, incomplete reporting of patient reported outcomes in the clinical trials or missed doses;

lack of safety and efficacy in the clinical trials;

delays in manufacture of supplies for both drug and device components due to delays in formulation, process development, or manufacturing activities;

requirements for additional nonclinical or clinical trials based on changes to formulation and/or changes to regulatory requirements;

poor quality or missing data from the clinical trials;

requirements for additional clinical trials based on inconclusive or negative clinical results or changes in market, standard of care, and/or regulatory requirements.

FDA rejection of our BLA submissions for our product candidate;

regulatory rejection in the EU, Japan, and other markets;

delays during regulatory review and/or requirements of additional chemistry, manufacturing, and controls, nonclinical, or clinical studies, resulting in increased costs and/or delays in marketing approval and subsequent commercialization of the product candidate in the United States and other markets;

inability to consistently manufacture commercial supplies of drug and delivery devices resulting in slowed market development and lower revenue;

poor commercial sales due to:

the inability of our future sales organization or our potential commercialization partners to effectively sell the product candidate;

our lack of success in educating physicians and patients about the benefits, administration, and use of our product candidate;

the availability, perceived advantages, relative cost, relative safety, and relative efficacy of other products or treatments for the targeted indications of the product candidate;

low patient demand for the product candidate;

poor prescription coverage and inadequate reimbursement for our product candidate;

our inability to enforce our intellectual property rights in our product candidate;

reduction in the safety profile of our product candidate following approval.

Many of these clinical, regulatory, and commercial matters are beyond our control and are subject to other risks described elsewhere in this Risk Factors section.

If we cannot do so, or are significantly delayed in doing so, our business will be materially harmed.

Additionally, as we continue to advance the IMPALA-2 trial, there remains general uncertainty regarding the impact of COVID-19 and emerging variants on the aPAP patient population and physicians.

Patients suffering from aPAP are prone to underlying lung conditions and are often treated by infectious disease specialists and pulmonologists.

These treating physicians are on the front lines in addressing this global pandemic and have had to, understandably, focus their attention on COVID-19.

Further, if an aPAP patient enrolled in the trial were to contract COVID-19, they may need to discontinue their participation.

If we fail to attract and retain senior management and key scientific personnel and develop and maintain relationships with service providers, consultants and advisers, we may be unable to successfully develop and commercialize our product candidate.

We have historically operated with a limited number of employees that manage third parties for most development activities.

Institutional knowledge is concentrated within a small number of employees.

Our success depends on our continued ability to attract, retain, and motivate highly qualified management, clinical, and scientific personnel.

Our future success is highly dependent upon the contributions of our senior management, as well as our senior scientists and other members of our senior management team.

The loss of services of any of these individuals, who all have at-will employment arrangements with us, could delay or prevent the successful development of our product pipeline, completion of our planned clinical trials, or the commercialization of our product candidate.

Replacing key employees may be a difficult, costly, and protracted process, and we may not have other personnel with the capacity to assume all the responsibilities of a key employee upon his/her departure.

Transition periods can be difficult to manage and may cause disruption to our business.

In addition, there may be intense competition from other companies and organizations for qualified personnel.

Other companies and organizations with which we compete for personnel may have greater financial and other resources and different risk profiles than us, and a history of successful development and commercialization.

If we cannot attract and retain skilled personnel, as needed, we may not achieve our development and other goals.

The success of our business will depend on our ability to develop and maintain relationships with respected service providers and industry-leading consultants and advisers.

If we cannot develop and maintain such relationships as needed, the rate and success at which we can develop and commercialize our product candidate may be limited.

In addition, our outsourcing strategy, which has included engaging consultants that spend considerable time to manage key functional areas, may subject us to scrutiny under labor laws and regulations, which may divert management time and attention and have an adverse effect on our business and financial condition.

The COVID-19 global pandemic has required us to adapt our operations, such as enabling employees to work remotely, which may adversely affect their employment satisfaction or productivity.

Risks Related to Our Dependence on Third Parties

We do not have, and do not have plans to, establish commercial manufacturing facilities.

We completely rely on third parties for the manufacture and supply of our clinical trial drug and delivery device supplies and, if approved, commercial product materials.

The loss of any of these vendors or a vendor’s failure to provide us with an adequate supply of clinical trial or commercial product material in a timely manner and on commercially acceptable terms, or at all, could harm our business.

We outsource the manufacture of our molgramostim product candidate and do not plan to establish our own manufacturing facilities.

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If these third parties are unable to perform their tasks successfully in a timely manner, whether for technical, financial, or other reasons, we may be unable to secure clinical trial material, or commercial supply material if approved, which likely would delay the initiation, conduct, or completion of our clinical trials or prevent us from having enough commercial supply material for sale, which would have a material and adverse effect on our business.

For example, the impacts of the current COVID-19 global pandemic are evolving.

There have been and could be additional delays in the manufacturing supply chain for our product candidate, including delays in procurement of materials for certain of our clinical trials due to the outbreak, potentially resulting in delays in clinical trials and recruitment.

There have been and could be additional delays in the manufacturing supply chain for our product candidate, including delays in procurement of materials for certain of our clinical trials, potentially resulting in delays in clinical trials and recruitment.

Further, we have experienced an increase in costs associated with the supply chain disruption.

The extent to which the pandemic and global conflicts and acts of war impact our ability to procure sufficient supplies for the development and commercialization of our product candidate going forward will depend on the severity and duration of the spread of COVID-19 and emerging variants and the actions undertaken to contain the pandemic or treat its effects as well as the length and scope of global conflicts and acts of war.

The extent to which circumstances such as global health threats, global conflicts, and social unrest impact our ability to procure sufficient supplies for the development and commercialization of our product candidate going forward will depend on the severity and duration of such circumstances.

For example, our primary CMO for drug substance operates in Argentina, which is experiencing high inflation, a weakening currency, labor strikes and social and political unrest.

Those conditions could result in supply chain disruptions or increased costs.

All manufacturers of our clinical trial material and, if approved, commercial product, including drug substance manufacturers, must comply with cGMP requirements enforced by the FDA through its facilities inspection program and applicable requirements of foreign regulatory authorities.

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Manufacturers of our clinical trial material may be unable to comply with these cGMP requirements and with other FDA, state, and foreign regulatory requirements.

While we and our representatives generally monitor and audit our manufacturers’

systems, we do not have full control over their ongoing compliance with these regulations.

While we and our representatives generally monitor and audit our manufacturers’ systems, we do not have full control over their ongoing compliance with these regulations.

Although the responsibility to maintain cGMP compliance is a requirement of third-party manufacturers, we bear ultimate responsibility for our supply chain and compliance with regulatory standards.

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Therefore, if our primary and back-up vendors become unable or unwilling to perform their required activities, we could experience protracted delays or interruptions in the supply of clinical trial material and, ultimately, product for commercial sale, which would materially and adversely affect our development programs, commercial activities, operating results, and financial condition.

In addition, the FDA or regulatory authorities outside of the United States may require that we have an alternate manufacturer of a drug product before approving it for marketing and sale in the United States or abroad and securing such alternate manufacturer before approval of a BLA could result in considerable additional time and cost prior to BLA approval.

We have recently engaged a second source manufacturer for molgramostim.

Any new manufacturer or supplier of finished drug product or its component materials, including drug substance and delivery devices, would be required to qualify under applicable regulatory requirements and would need to have sufficient rights under applicable intellectual property laws to the method of manufacturing of such product or ingredients required by us.

The FDA or foreign regulatory agency may require us to conduct additional clinical trials, collect stability data, and provide additional information concerning any new supplier, or change in a validated manufacturing process, including scaling-up production, before we could distribute products from that manufacturer or supplier or revised process.

For example, if we were to engage a third party other than our current CMOs to supply the drug substance or drug product for future clinical trials or commercial sale, the FDA or regulatory authorities outside of the United States.

may require us to conduct additional clinical and nonclinical studies to ensure comparability of the drug substance or drug product manufactured by our current CMOs to that manufactured by the new supplier.

Changing of suppliers or equipment is particularly challenging for companies like us, with inhalation products, because any change could alter the performance of the drug product.

The manufacture of pharmaceutical products requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls.

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We cannot provide assurance that manufacturing or quality control problems will not arise in connection with the manufacture of our clinical trial material or commercial product, if approved, or that third-party manufacturers will be able to maintain the necessary governmental licenses and approvals to continue manufacturing such clinical trial material or commercial product, as applicable.

In addition, molgramostim is currently manufactured entirely outside the United States and, as a result, we may experience interruptions in supply due to shipping or customs difficulties or regional instability.

In addition, molgramostim is currently manufactured entirely outside the U.S.

and, as a result, we may experience interruptions in supply due to shipping or customs difficulties or regional instability.

Furthermore, changes in currency fluctuations, shipping costs, or import tariffs could adversely affect cost of goods sold.

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Our dependence upon third parties for the manufacture of our clinical trial material may adversely affect our future costs and our ability to develop and commercialize our product candidate on a timely and competitive basis.

The company intends to establish a redundant supply chain with second sources of drug substance and drug product manufacture.

If the product manufactured at the second sources of manufacture is not demonstrated to be comparable with materials used in the clinical program, we will not be able to commercialize from these second sources.

We currently rely on and have engaged third-parties for our drug product and drug substance manufacturing to ensure all aspects of our manufacturing are validated and can produce product at commercial scale to serve as second source manufacturers and suppliers of the molgramostim drug substances to attain uninterrupted drug substance supply and mitigate approvability risk.

If the second sources do not demonstrate the ability to provide drug substance and drug product manufacture comparable to our primary sources, the supply chain and scalability to commercialize molgramostim could be adversely impacted.

We rely significantly on third parties to conduct our nonclinical testing and clinical trials and other aspects of our molgramostim development program, and if those third parties do not satisfactorily perform their contractual obligations or meet anticipated deadlines, the development of our molgramostim product candidate could be adversely affected.

We do not employ personnel or possess the facilities necessary to conduct many of the activities associated with our programs.

We engage consultants, advisors, CROs, and others to assist in the design and conduct of nonclinical and clinical trials of our product candidate, with interpretation of the results of those trials and with regulatory activities, and we

expect to continue to outsource all or a significant amount of such activities.

Specifically, in early 2021, we engaged Parexel to support our IMPALA-2 clinical trial development activities.

As a result, many important aspects of our development programs are and will continue to be outside our direct control, and our third-party service providers may not perform their activities as required or expected, including the maintenance of good clinical practice (“GCP”), good laboratories practice (“GLP”), and cGMP compliance, which are ultimately our responsibility to ensure.

For example, we have engaged a CRO, Parexel, to support our IMPALA-2 pivotal clinical trial development activities, and we are substantially dependent upon Parexel for the conduct of the IMPALA-2 pivotal trial.

Many important aspects of our development programs are and will continue to be outside our direct control, and our third-party service providers may not perform their activities as required or expected, including the maintenance of GCP, GLP, and cGMP compliance, which are ultimately our responsibility to ensure.

Further, such third parties may not be as committed to the success of our programs as our own employees and, therefore, may not devote the same time, thoughtfulness, or creativity to completing projects or problem-solving as our own employees would.

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Individuals working at the CROs with which we contract, as well as investigators at the sites at which our trials are conducted, are not our employees, and we have limited control over the amount or timing of resources that they devote to their programs.

In addition, our CROs may be affected by business or workforce interruptions for many reasons, including as a result of an outbreak of COVID-19, emerging variants, or another infectious disease, over which they and we have limited control.

If our CROs, trial investigators, and/or third-party sponsors fail to devote sufficient time and resources to trials of our product candidate, if we and/or our CROs do not comply with all GLP and GCP regulatory and contractual requirements, or if their performance is substandard, we may delay commencement and/or completion of these trials, submission of applications for regulatory approval, regulatory approval, and commercialization of our product candidate.

In addition, our CROs may be affected by business or workforce interruptions for many reasons over which they and we have limited control.

If our CROs, trial investigators, and/or third-party sponsors fail to

devote sufficient time and resources to trials of our product candidate, if we and/or our CROs do not comply with all GLP and GCP regulatory and contractual requirements, or if their performance is substandard, we may delay commencement and/or completion of these trials, submission of applications for regulatory approval, regulatory approval, and commercialization of our product candidate.

Failure of CROs to meet their obligations to us could adversely affect development of our product candidate.

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These challenges could result in delays in the commencement or completion of our clinical trials, which could materially impact our ability to meet our desired and/or announced development timelines and have a material adverse impact on our business and financial condition.

For example, patients in earlier-stage trials may be more sick, compliant, or otherwise motivated than patients in larger trials.

As such, efficacy or safety results may differ significantly between trials.

If we fail to demonstrate the efficacy of our drug candidate or undesirable side effects occur, they could possibly prevent approval, which would have a material and adverse effect on our business.

If our product candidate receives marketing approval and we or others later identify undesirable side effects caused by the product:

regulatory authorities may require the addition of labeling statements, such as a “black box”

warning or a contraindication;

regulatory authorities may withdraw their approval of the product;

we may be required to change the way the product is administered, conduct additional clinical trials, or change the labeling of the product;

our reputation may suffer.

We may not achieve our projected development goals in the time frames we have announced.

We have set goals for accomplishing certain objectives material to the successful development of our molgramostim product candidate.

The actual timing of these events may vary due to many factors, including delays or failures in our nonclinical testing, clinical trials, and manufacturing and regulatory activities and the uncertainties inherent in the regulatory approval process.

From time to time, we create estimates for the completion of enrollment of or announcement of data from clinical trials of our product candidate.

However, predicting the rate of enrollment or the time from completion of enrollment to announcement of data for any clinical trial requires us to make significant assumptions that may prove to be incorrect.

Our estimated enrollment rates and the actual rates may differ materially, and the time required to complete enrollment of any clinical trial may be considerably longer than we estimate.

Such delays may adversely affect our financial condition and results of operations.

Even if we complete a clinical trial with successful results, we may not achieve our projected development goals in the time frames we initially anticipate or announce.

If a development plan for a product candidate becomes more extensive and costly than anticipated, we may determine that the associated time and cost are not financially justifiable and, as a result, may discontinue development in a particular indication or of the product candidate as a whole.

In addition, even if a trial did complete with successful results, changes may occur in regulatory requirements or policy during the period of product development and/or regulatory review of a BLA that relate to the data required to be included in BLAs, which may require additional studies that may be costly and time consuming.

Any of these actions may be viewed negatively, which could adversely impact our financial condition.

Further, throughout development, we must provide adequate assurance to the FDA and other regulatory authorities that we can consistently develop and produce our product candidate in conformance with GLP, GCP, cGMP, and other regulatory standards.

As discussed above, we rely on CMOs for the manufacture of clinical, and future commercial, quantities of our product candidate.

If future FDA or other regulatory authority inspections identify cGMP compliance deficiencies at these third-party facilities, production of our clinical trial material or, in the future, commercial product, could be disrupted, causing potentially substantial delay in or failure of development or commercialization of our product candidate.

We are substantially dependent upon our primary CRO, Parexel, for conducting our IMPALA-2 clinical trial.

We do not employ personnel or possess the facilities necessary to conduct many of the activities associated with our IMPALA-2 clinical trial.

We have engaged a CRO, Parexel, to assist in the conduct of the trial.

As a result, many important aspects of our development programs are, and will, continue to be outside our direct control.

Parexel may not perform their activities as required or expected, including the maintenance of GCP and GLP.

Further, Parexel may not be as committed to the success of our program as our own employees would.

To the extent we are unable to successfully manage the performance of Parexel, our business may be adversely affected.

Our employees, independent contractors and consultants, principal investigators, CROs, CMOs, other vendors, and any future commercial partners may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could cause significant liability for us and harm our reputation.

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For example, if one of our manufacturing partners were placed under a consent decree, we may be hampered in our ability to manufacture clinical or commercial supplies.

Our operations might be interrupted and financial results could be adversely impacted by the occurrence of a natural disaster, acts of war or terrorism, system malfunction, telecommunication and electrical failures or other catastrophic event, or public health crises, such as a pandemic (e.g., COVID-19).

As of December 31, 2022, our corporate headquarters is located in a commercial facility in Austin, Texas, USA, and we maintain additional facilities in Langhorne, Pennsylvania.

Important documents and records, including copies of our regulatory documents and other records for our product candidate, are located both at a secure offsite document storage facility as well as at our own facilities, and we depend on our facilities for the continued operation of our business.

Natural disasters and other catastrophic events, such as wildfires and other fires, earthquakes and extended power interruptions, public health crises, severe weather conditions, or acts of war or terrorism, such as the conflict between Russia and Ukraine, could significantly disrupt our operations and result in additional, unplanned expense.

Any natural disaster or catastrophic event could disrupt our business operations and result in setbacks to our development programs.

Even though we believe we carry commercially reasonable insurance, we might suffer losses that are not covered by or exceed the coverage available under these insurance policies.

In addition, our operations may be adversely impacted by international conflict.

For example, tensions between Ukraine and Russia have escalated in 2022, culminating in Russia’s invasion of Ukraine.

The political and physical conditions in Ukraine and Russia, as well as in neighboring countries, may disrupt our supply chain and increase our costs, which may adversely affect our ability to conduct ongoing clinical trials and impact patients’

ability to partake in our clinical trials.

While we do not believe this conflict will have a material impact on our current operations, given the rapidly evolving situation and the potential to expand beyond Ukraine and Russia, the full impact of the conflict remains uncertain.

During the first quarter of 2020, COVID-19 was declared a pandemic by the World Health Organization, resulting in significant disruptions to United States and international manufacturing and supply chains or operations as well as travel restrictions in the United States and many other countries.

Global supply chain disruptions have resulted in delays and increased costs associated with the goods.

While the continued impact of the current COVID-19 pandemic and emerging variants on our business and financial results is uncertain, the COVID-19 pandemic has had a negative impact on our business, financial condition, and operating results.

Further, we have experienced an increase in costs associated with the supply chain disruption.

In a more severe scenario, our business, financial condition, and operating results could be more significantly affected.

Given the dynamic nature of these circumstances, the impact of potential future disruptions of the manufacturing and supply chain associated with the COVID-19 pandemic and emerging variants is difficult to predict.

The company intends to establish a redundant supply chain with second sources of drug substance and drug product manufacture.

If the product manufactured at the second sources of manufacture is not demonstrated to be comparable with materials used in the clinical program, we may not be able to commercialize from these second sources.

We have engaged third-parties for our drug product and drug substance manufacturing to serve as second source manufacturers and suppliers of molgramostim to attain uninterrupted supply and mitigate approvability risk.

If the second sources do not demonstrate the ability to provide comparable product to our primary sources, the supply chain and scalability to commercialize molgramostim could be adversely impacted.

Any new manufacturer or supplier would be required to qualify under applicable regulatory requirements and would need to have sufficient rights under applicable intellectual property laws to the method of manufacturing of such product or ingredients required by us.

Changing of suppliers is particularly challenging for companies like us, with inhalation products, because any change could alter the performance of the drug product.

Risks Related to Competition, Retaining Key Employees and Managing Growth

Molgramostim has received Orphan Drug Designation from the FDA and the EMA.

If a competitor obtains Orphan Drug exclusivity for a product with the same active ingredient and route of delivery as molgramostim for aPAP, we may be unable to market our product candidate until the exclusivity of the competing product expires.

Molgramostim has received Orphan Drug Designation in the U.S.

by the FDA and in Europe by the EMA for the treatment of aPAP.

If approval is received to market molgramostim, the FDA will not approve a similar product, with the same active ingredient, to molgramostim for seven years and the EMA will not approve a similar product to molgramostim for ten years, unless we are unable to produce enough supply to meet demand in the marketplace or another similar product, with the same active ingredient, is deemed clinically superior.

Similar product candidates, with the same active ingredient and route of delivery, may be granted Orphan Drug Designation during the development, but the Orphan Drug exclusivity is granted only to the first of such products approved, which means there is risk that a competitor product candidate may receive approval and Orphan Drug exclusivity before us, thus preventing us from marketing our product candidate until the exclusivity of the competing product expires.

Also, the Orphan Drug status will not prevent a competitor with a different active ingredient from competing with our product candidate.

If we are prevented from marketing molgramostim for aPAP due to a competitor’s Orphan Drug exclusivity, it would have a material adverse effect on our business.

We expect competition in the marketplace for our molgramostim product candidate should it receive regulatory approval.

The development and commercialization of new drug products is highly competitive and subject to rapid and significant change.

Developments by others may render potential application of our molgramostim product candidate in aPAP obsolete or noncompetitive, even prior to completion of its development and approval.

If successfully developed and approved, we expect our product candidate will face competition.

We may not be able to compete successfully against organizations with competitive products, particularly large pharmaceutical companies.

Many of our potential competitors have significantly greater financial, technical, and human resources than us, and may be better equipped to develop, manufacture, market, and distribute products.

Many of these companies operate large, well-funded research, development, and commercialization programs, have extensive experience in nonclinical and clinical trials, obtaining FDA and other regulatory approvals and manufacturing and marketing products, and have multiple products that have been approved or are in late-stage development.

These advantages may enable them to receive approval from the FDA or any foreign regulatory agency before us and prevent us from competing due to their orphan drug protections.

Smaller companies may also prove to be significant competitors, particularly through collaborative arrangements with large pharmaceutical and biotechnology companies.

Furthermore, heightened awareness on the part of academic institutions, government agencies, and other public and private research organizations of the potential commercial value of their inventions have led them to actively seek to commercialize the technologies they develop, which increases competition for investment in our programs.

Competitive products may be more effective, easier to dose, or more effectively marketed and sold than ours, which would have a material adverse effect on our ability to generate revenue.

Although we are not aware of any companies developing an inhaled form of GM-CSF for the treatment of aPAP, Leukine ® (sargramostim), a yeast-derived recombinant human granulocyte-macrophage colony stimulating factor, rhu-GM-CSF, which is a product of Partner Therapeutics, Inc., is being pharmacy-compounded and utilized by some patients for the off-label treatment of aPAP.

Additionally, Partner Therapeutics, Inc.

is working with the Pharmaceuticals and Medical Devices Agency and the MHLW in Japan for regulatory approval of Leukine ® for the treatment of aPAP.

We cannot assess the likelihood of formal regulatory approval of Leukine ® , the effectiveness of its off-label administration to patients with aPAP, or the number of aPAP patients using Leukine ® for the pharmacy-compounded off-label treatment.

If Leukine ® were to receive formal regulatory approval in Japan, we believe it has the potential to present a material competitive threat to the commercial success of molgramostim in Japan, which could have a material adverse effect on our business.