What changed in this filing

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Item 1. Business

2022-03-29 compared with 2021-03-29 · 586 added, 479 removed, 15 unchanged (99% of the section changed)

We are a biopharmaceutical company that was previously primarily focused on developing novel treatments for endocrine diseases where current therapies do not exist or are insufficient.

The endocrine system is a collection of glands that secrete hormones into the blood stream to regulate a number of functions, including appetite, metabolism, growth, development and reproduction.

Diseases of the endocrine system can cause multiple and varied symptoms, including appetite dysregulation, metabolic dysfunction, obesity, cardiovascular disease, menstrual irregularity, hirsutism, and infertility.

In April 2020, our Board of Directors (“Board”) decided to discontinue the development of livoletide, an unacylated ghrelin analogue, as a potential treatment for Prader-Willi syndrome (“PWS”) based upon results from its Phase 2b trial.

In addition, in June 2020, our Board decided to cease investing in the development of nevanimibe as a potential treatment for classic congenital adrenal hyperplasia, (“CAH”) based on an interim review of data from its Phase 2b trial.

Finally, in January 2021, our Board also decided to discontinue our investment in MLE-301, a neurokinin 3 receptor (“NK3R”) antagonist we were developing for the treatment of menopausal vasomotor symptoms (“VMS”), based on an analysis of the pharmacokinetic and pharmacodynamic data from the ongoing single ascending dose portion of the Phase 1 study conducted in healthy male volunteers.

Given our limited expected financing options, we began exploring an expanded range of strategic alternatives that included, but was not limited to, the potential sale or merger of the Company or our assets.

In an effort to streamline costs after discontinuing the PWS program, we eliminated employee positions representing approximately 30% of our prior headcount, which was completed in the second quarter of 2020.

We also began evaluating corporate strategic plans to prioritize and allocate resources to our remaining product candidates at the time and any future pipeline assets.

In January 2021, as a result of our decision to discontinue our investment in MLE-301, our Board also approved a corporate restructuring plan (the “Plan”) furthering our ongoing efforts to align our resources with our current strategy and operations.

In connection with the Plan, the Board determined to reduce our workforce by up to 85%, with the majority of the reduction in personnel expected to be completed by April 15, 2021.

We initiated this reduction in force in January 2021 and expect to provide severance payments and continuation of group health insurance coverage for a specified period to the affected employees.

We have also entered into retention arrangements with employees who are expected to remain with the Company.

We estimate that we will incur costs of approximately $5.5 million for termination benefits and retention arrangements related to the Plan, substantially all of which will be cash expenditures.

In 2020, we undertook a strategic review process, which was intended to result in an actionable plan that leverages our assets, capital and capabilities to maximize stockholder value.

Following an extensive process of evaluating strategic alternatives and identifying and reviewing potential candidates for a strategic acquisition or other transaction, on March 29, 2021, we entered into a merger agreement with Tempest Therapeutics, Inc.

(“Tempest”), under which the privately held Tempest will merge with a wholly owned subsidiary of Millendo (the “Merger”).

If the Merger is completed, the business of Tempest will continue as the business of the combined organization.

We expect to devote significant time and resources to completion of this Merger.

However, there can be no assurance that such activities will result in the completion of the Merger.

Further, the completion of the Merger may ultimately not deliver the anticipated benefits or enhance shareholder value.

If the Merger is not completed, we will reconsider our strategic alternatives.

In this case, we consider one of the following courses of action to be the most likely alternatives:

• Dissolve and liquidate our assets.

If, for any reason, the Merger does not close, our Board may conclude that it is in the best interest of stockholders to dissolve the Company and liquidate our assets, which may include seeking protection from creditors in a bankruptcy proceeding.

In that event, we would be required to pay all of our debts and contractual obligations, and to set aside certain reserves for potential future claims.

There would be no assurances as to the amount or timing of available cash remaining to distribute to stockholders after paying our obligations and setting aside funds for reserves.

• Pursue another strategic transaction.

We may resume the process of evaluating a potential strategic transaction in order to attempt another strategic transaction like the Merger.

• Operate our business.

Although less likely than the alternatives above, our Board may elect to seek new product candidates for development.

Historical Business and Programs

In 2020, we advanced three product candidates.

Livoletide (AZP-531), was a potential treatment for PWS, a rare and complex genetic endocrine disease usually characterized by hyperphagia, or insatiable hunger, that contributes to serious complications, a significant burden on patients and caregivers, and early mortality.

In a randomized, double-blind, placebo-controlled Phase 2a clinical trial in 47 patients with PWS, we observed that administration of livoletide once daily was associated with a clinically meaningful improvement in hyperphagia, as well as a reduction in appetite.

In a pre-specified analysis of 38 home-resident patients with PWS from the Phase 2a trial, we observed a larger and statistically significant decrease in hyperphagia following administratio n of livoletide as compared to placebo.

In March 2019, we initiated a Phase 2b/3 clinical trial of livoletide in patients with PWS .

In April 2020, we discontinued the PWS program based on topline data from the Phase 2b ZEPHYR study which showed that treatment with livoletide did not result in a statistically significant improvement in hyperphagia and food-related behaviors as measured by the Hyperphagia Questionnaire for Clinical Trials (HQ-CT) compared to placebo.

We were developing nevanimibe (ATR-101) as a potential treatment for patients with CAH, a rare, monogenic adrenal disease that requires lifelong treatment with exogenous cortisol, often at high doses.

These chronic high doses of cortisol can result in side effects that include diabetes, obesity, hypertension and psychological problems.

When on suboptimal doses of cortisol, female patients with CAH can experience hirsutism, infertility and menstrual irregularity, and male patients with CAH can experience testicular atrophy, infertility and testicular tumors.

It is often difficult for physicians to appropriately treat CAH without causing adverse consequences.

We reported results from our Phase 2a clinical trial of nevanimibe in patients with CAH in March 2018 and initiated a Phase 2b trial in the third quarter of 2018.

In June 2020, we elected to cease investing in the development of nevanimibe as a potential treatment for CAH.

The decision to cease investment in the CAH program was based on the interim review of results from the Phase 2b clinical study and the changing competitive environment.

Results from 10 subjects, nine from cohort 1 and one from cohort 2, with at least 12 weeks of treatment with nevanimibe in this open-label, continuous dose escalation study showed that one patient (10%) met the primary endpoint of achieving 17-hydroxyprogesterone (17-OHP) levels less than or equal to 2-times the upper limit of normal.

Treatment under the amended protocol with dose titration starting at 500 mg BID improved tolerability of nevanimibe.

We are no longer developing nevanimibe for the treatment of CAH.

We were also developing a NK3R antagonist (MLE-301) as a potential treatment of vasomotor symptoms (“VMS”), commonly known as hot flashes and night sweats, in menopausal women.

The sensations of heat and/or perspiration associated with VMS can occur frequently, generally lasting several minutes, and are often preceded or followed by sensations of cold and/or shivering.

VMS interfere with the lives of affected women in a number of ways, including disrupting patients' ability to sleep and concentrate and causing anxiety and depression.

VMS is experienced by up to 70% of women as they advance through menopause.

We believe that over 20 million women in the United States experience VMS at any given time and that these patients are motivated to seek medical treatment for relief.

In September 2020, we initiated our Phase 1 clinical trial of MLE-301.

The Phase 1 clinical trial was supported by preclinical studies in which we observed potency and selectivity for the NK3R, the potential for once-daily dosing, and testosterone lowering consistent with the expected activity of an NK3R antagonist.

In January 2021, we discontinued further investment in the development of MLE-301 for the treatment of VMS based on an analysis of the pharmacokinetic and pharmacodynamic data from the single ascending dose portion of the Phase 1 study and the competitive NK3R antagonist market.

We had also been investigating nevanimibe (ATR-101) as a potential treatment for patients with endogenous Cushing’s syndrome (“CS”), a rare endocrine disease characterized by excessive cortisol production from the adrenal glands.

As a result of slower than anticipated enrollment in our CS Phase 2 clinical trial, we elected to discontinue the trial in August 2019 and are no longer developing nevanimibe for the treatment of CS.

We are a clinical-stage oncology company focused on leveraging our deep scientific understanding of cancer biology and medicinal chemistry to develop and advance novel orally available therapies for the treatment of solid tumors.

Our philosophy is to build a company based upon not only good ideas and creative science, but also upon the efficient translation of those ideas into therapies that will improve patients’ lives.

To this end, we are advancing TPST-1120 and TPST-1495, two product candidates in clinical trials that we believe are the first clinical stage molecules designed to treat their respective targets;

as well as two preclinical programs, including one that could be the first to target TREX-1, a key cellular enzyme that regulates the innate immune response in tumors.

TPST-1120 is a selective antagonist of peroxisome proliferator-activated receptor alpha, or PPARα, and is in ongoing Phase 1 and 2 trials in solid tumors, including a global randomized Phase 1b/2 trial in combination with the standard-of-care first-line regimen of atezolizumab and bevacizumab in patients with advanced or metastatic hepatocellular carcinoma, or HCC.

Our second program, TPST-1495, is a dual antagonist of EP2 and EP4, receptors of prostaglandin E2, and is currently in a Phase 1 monotherapy and combination trial in solid tumors.

We expect to report data from these programs in 2022 and 2023, starting with the TPST-1120 Phase 1 monotherapy and combination data in mid-2022.

Additionally, we expect to select a development candidate in 2022 for a third program that targets the three prime repair exonuclease ("TREX-1").

Finally, we have a fourth program targeting what we believe is a novel oncology drug target in a newly defined tumor pathway, resulting from an exclusive license with the University of California at Berkeley.

Beyond these four ongoing programs, we plan to continue to leverage our drug development and company-building experience along with academic relationships to identify promising new targets that may feed new programs into our pipeline.

We have developed a diversified pipeline of small molecule product candidates that are designed to target tumor cells directly, modulate the immune system to kill cancer cells, or a combination of both, in each case in which we believe are innovative and target scientifically validated pathways.

We selected targets that are expressed in a diverse set of tumor types with the intention to address unmet medical needs or improve existing standards of care.

Our product development pipeline consists of the following orally-available therapies, which if approved by the U.S.

Food and Drug Administration (the "FDA"), we believe will be first in class:

** If accepted to present

1 Timing is an estimate based on current projections

2 Pursuant to a collaboration with Roche;

TPST retains all product rights

3 Based on partner projections, ORR on 40 pts in triplet arm expected by YE/early 2023, with additional data in 2023 (including on additional patients, if study expanded)

4 Study could be either a single indication or biomarker-based basket

5 With additional funding, monotherapy expansion would be in select indications based on target expression and/or a biomarker-positive basket cohort;

ORR data expected from monotherapy expansion arms within 12 to 18 months of study commencement, depending on the histology “RCC” renal cancer;

“HCC” hepatocellular carcinoma;

“CCA” cholangiocarcinoma “FPI” first patient in;

“RP2D” recommended Ph2 dose

Our team has come together to build an integrated company that delivers meaningful therapies to cancer patients, through leveraging our team’s capabilities and research and development engine.

We expect to build value for our stockholders with the following over-arching strategy:

• Advance TPST-1120 from completing our ongoing Phase 1a/b trial and presenting data in the first half of 2022 and facilitating our collaboration with Hoffman-La Roche Ltd., or Roche, which is evaluating TPST-1120 in a randomized, global, first-line HCC study.

Roche commenced enrollment in September 2021, and we expect enrollment of the first 40 patients in the TPST-1120 arm to be complete in the second half of 2022.

Because TPST-1120 is being combined with a standard-of-care first-line treatment and being compared to that same standard-of-care, we believe positive study results may provide multiple strategic opportunities for us.

We expect to present data from the Phase 1a/1b trial by mid-2022 and receive objective response rate, or ORR, results from the Phase 1b/2 from Roche for the first 40 patients in the triplet arm by the end of 2022.

• Advance TPST-1495, our dual EP2/4 antagonist, through clinical development to near-term meaningful data.

We plan to complete the ongoing TPST-1495 monotherapy and combination therapy arms of the Phase 1a/b study and select a recommended Phase 2 dose, or RP2D, in the first and second halves of 2022, respectively.

Once the monotherapy RP2D is established, with additional funding, we plan to open expansion arms in targeted patient populations where prostaglandin signaling is implicated in the disease, such as endometrial cancer or those patients with a mutation in the PIK3CA gene.

We expect to have ORR data from the dose and schedule optimization arms by the end of 2022 or in early 2023 and from any monotherapy expansion arms in 12 to 18 months of study commencement, depending on the histology.

• Advance our preclinical programs into clinical studies, including our TREX-1 inhibitor.

Our team developed the first-in-human STING (STimulator of INterferon Genes) agonists in a prior company and is widely acknowledged to be leaders in the field.

We believe that a selective TREX-1 inhibitor given orally is an innovative approach to selectively engage the STING pathway broadly in the tumor microenvironment of metastatic disease.

Our medicinal chemists have developed a series of potent compounds against human TREX-1, which we are optimizing towards selecting a development candidate for investigational new drug application ("IND"), enabling activities in 2022.

• Explore business development opportunities to maximize the potential of our pipeline and extend financial resources.

We believe that our pipeline has broad potential reach and partnerships that bring in additional expertise and/or geographic presence could be important to increase the likelihood of success.

We intend to become a fully integrated biopharmaceutical company and build a targeted sales force in the United States to support the commercialization of our drug candidates, if approved.

• Enhance our pipeline by identifying novel oncology targets and in-licensing opportunities.

Although we believe we have a robust pipeline, we continue to evaluate and pursue novel targets, intellectual property and product candidates for acquisition and in-licensing to supplement our internal research efforts and further build our pipeline of targeted molecules for oncology.

Through our team’s focus and expertise in oncology and immunology, as well as established relationships with oncology and immunology thought leaders, we are positioning the company as a partner of choice for innovative oncology drug candidate development.

We believe continued advances in the biological understanding of diseases will provide opportunities to further expand our portfolio with preclinical and/or clinical product candidates.

Clinical Programs

PPARα Transcription Factor Antagonist

TPST-1120 is potentially a first-in-class oral, small molecule antagonist of PPARα, and is being studied in both a Phase 1a/b and Phase 1b/2 trial.

The Phase 1a/b trial is a multicenter, open-label, dose-escalation, that is evaluating TPST-1120 as both a monotherapy and in combination with nivolumab in patients with advanced solid tumors.

The monotherapy dose escalation phase has been completed, and the combination arm is ongoing.

Tempest has observed evidence of TPST-1120 clinical activity

in the dose escalation arms, and we plan to disclose the results of the monotherapy and combination therapy dose escalation trial in the first half of 2022.

The Phase 1b/2 trial is a randomized, multicenter, global study in collaboration with Roche that is evaluating TPST-1120 in combination with atezolizumab (Tecentriq®) and bevacizumab (Avastin®) in previously untreated patients with advanced HCC, compared to atezolizumab and bevacizumab, a standard of care for that indication and patient population.

We expect to have initial ORR data from the first 40 patients in the trial by the end of 2022.

Tumors evolve to modulate metabolism to promote their own survival, promote angiogenesis and to evade immune recognition.

PPARα is a transcription factor that is activated through binding of long-chain fatty acid ligands, which in turn regulates the expression of >100 genes that control glucose and lipid homeostasis, inflammation, proliferation, differentiation and cell death.

Included among these regulated genes are those that enable fatty acid oxidation, or FAO, and β-oxidation metabolic pathways in cellular peroxisomes and in mitochondria.

An FAO metabolic profile is associated with tumor proliferation, induction of angiogenesis and immune suppression.

Published studies and internal Tempest analyses of over 9,000 primary or metastatic tumor samples in the Human Cancer Genome, or TCGA, public database reveal a metabolic gene expression profile characterized by increased PPARα, FAO genes and lipogenesis associated with increased metastatic potential and reduced survival enrichment among multiple cancers, including HCC, cholangiocarcinoma, breast carcinoma, colorectal adenocarcinoma, RCC, lung adenocarcinoma and prostate adenocarcinoma.

TPST-1120 is designed to collectively block the pathways that support tumor cell proliferation, angiogenesis and immune suppression, resulting in reduced disease and patient benefit.

Summary of TPST-1120 Preclinical Results

We have conducted pre-clinical pharmacology studies along with pharmacokinetics, or PK, and toxicology studies with TPST-1120 to support its ongoing evaluation for the treatment of patients with advanced solid tumors.

The combined results of the preclinical studies that we have performed indicate that the TPST-1120 anti-tumor mechanism of action involves both directly inhibiting tumor proliferation and targeting suppressive immune response pathways to promote effective tumor-specific immunity.

Our preclinical results support the large body of published literature that the PPARα target genes play an integral role in tumor growth, angiogenesis and evasion of immune recognition and provide the scientific rationale for targeting this pathway with TPST-1120.

Immune checkpoint blockade enhances anti-tumor immunity by restoring the activity of cytotoxic T (Teff) cells.

Emerging experimental results suggest that inhibiting FAO with a PPARα antagonist may target resistance mechanisms to both anti-PD-L1/PD-1 and anti-VEGF therapies, supporting the combination of TPST-1120 with either or both therapies.

We have conducted preclinical studies showing that while both TPST-1120 or anti-PD-1 monotherapy inhibited outgrowth of established flank MC38 tumors, the combination of these two agents resulted in synergistic anti-tumor activity.

In addition, MC38 tumor-bearing mice cured by the combination therapy, unlike age-matched naïve control mice, were completely refractory to tumor growth when rechallenged with autologous MC38 tumor cells, demonstrating that TPST-1120 in combination with anti-PD-1 induced lasting tumor-specific immune memory.

Significant Anti-Tumor Activity and Induction of Tumor-Specific Immune Memory Observed

in MC38 Colon Tumor Bearing Mice Given with TPST-1120 + anti-PD-1 mAb Combination Therapy

Additionally, tumor resistance to anti-angiogenic drugs is associated with elevated lipogenesis and FAO, primarily through the vascular regression and hypoxic environment that this class of therapies engenders.

In response, tumor cells can switch to FAO as a mechanism of resistance against anti-angiogenic therapy.

In a preclinical study, we confirmed that combination of TPST-1120 with anti-angiogenesis therapy confers potent anti-tumor activity.

Taken together, the experimental results provide scientific rationale for the ongoing clinical evaluation of TPST-1120 therapy in first-line HCC in combination with atezolizumab and bevacizumab, and the potential evaluation of TPST-1120 in combination with cabozantinib in FAO-reliant malignancies such as HCC and RCC.

Overview of Ongoing TPST-1120 Clinical Trials

We are evaluating TPST-1120 in both a Phase 1a/b and Phase 1b/2 clinical studies.

The Phase 1a/b trial evaluates both monotherapy and combination therapy with the anti-PD-1 agent nivolumab in patients with advanced solid tumors that our PPARα- dependent transcriptome analysis of diverse human cancers revealed favor the usage of FAO.

The monotherapy dose escalation phase of the study is complete, and we expect the combination therapy dose escalation phase to complete in the first half of 2022.

In the monotherapy arm, we are encouraged by observations of tumor shrinkage and prolonged disease control in some patients.

Extended time on study has occurred in subjects with late-line treatment refractory cancers, including cholangiocarcinoma which is known to have particularly short time-to-progression with standard of care in the late-line treatment setting.

Shown below, one subject with late line cholangiocarcinoma had a 15% tumor shrinkage and was on study for over nine months of treatment, while also demonstrating on-target inhibition of expression of PPARα target genes on pharmacodynamic, or PD, assessment.

Additional subjects with late-line advanced cholangiocarcinoma had experienced prolonged stable disease and some reduction of tumor burden, although not to the extent of a RECIST response.

The TPST- 1120 combination arm with nivolumab has identified the RP2D and is ongoing, and we are observing an increased level of clinical benefit, including a deep RECIST response in a fourth-line patient with advanced kidney cancer, which was confirmed in subsequent on-study assessments and is ongoing beyond eleven months.

Notably, this patient had been treated with the combination of nivolumab and ipilimumab without experiencing an objective response and progressed on treatment, followed by further progression of cancer on both cabozantinib and everolimus, before initiating treatment with TPST-1120 and nivolumab.

The initial RECIST PR was seen at the first on-study assessment at eight weeks and included a response in all target lesions as well as complete radiographic resolution of multiple sites of metastatic disease (see CT scan below), and has been confirmed at subsequent assessments beyond 11 months.

Partial Response in Late-Line RCC Patient Treated with TPST-1120

and Nivolumab Combination Therapy

TPST-1120 is also under investigation in an ongoing randomized clinical trial in first-line HCC.

We entered into a clinical collaboration with Roche to evaluate TPST-1120 in combination with atezolizumab and bevacizumab in patients with advanced/metastatic HCC who have not yet been treated with systemic therapy.

Roche is operationalizing this trial to evaluate the triplet regimen of TPST-1120 + atezolizumab + bevacizumab randomized against the standard-of-care doublet of atezolizumab + bevacizumab.

The primary objective of this trial is to evaluate the anti-tumor efficacy of the combination as determined by confirmed ORR by RECIST 1.1.

Additional efficacy endpoints include progression free survival, or PFS, overall survival, or OS, and duration of response, or DOR, while a key exploratory objective is to identify biomarkers that are predictive of response to the experimental treatment, including an assessment activation of the ß-catenin pathway, which is predicted to be present in up to 50% of patients with HCC.

We anticipate receiving initial ORR results in the triplet arm by the end of 2022, and are considering the additional development of TPST-1120 in selected indications in combination with immunotherapy and/or anti-angiogenesis therapy.

We own worldwide rights to TPST-1120, and have filed and been issued patents, including composition of matter, pharmaceutical compositions, and related methods of use, that are expected to expire in December 2033.

Dual EP2/EP4 Prostaglandin Receptor Antagonist

Our second clinical molecule is TPST-1495, a potentially first-in-class, oral, small molecule dual antagonist of the prostaglandin E2, or PGE2, receptors, EP2 and EP4.

TPST-1495 is engineered to inhibit only these receptors while sparing the homologous - but differentially active - EP1 and EP3 receptors.

There is extensive literature demonstrating that PGE2 both enhances tumor proliferation and inhibits anti-cancer immune function;

it is known from the scientific literature that many tumors express elevated levels of the cyclooxygenase enzymes that produce PGE2.

We currently are evaluating TPST-1495 in a Phase 1a/b trial evaluating both monotherapy and combination therapy with the anti-PD-1 agent pembrolizumab in patients with advanced solid tumors.

We have observed dose-dependent TPST-1495 exposure, on-target pharmacodynamic changes and reduction of tumor-specific biomarkers in the ongoing dose optimization stage of the clinical study.

We expect to have ORR data from the dose and schedule optimization arms by the end of 2022 or in early 2023 and from any monotherapy expansion arms within 12 to 18 months of study commencement, depending on the histology.

Elevated expression of COX-2 and overproduction of PGE2 is correlated with progression of diverse malignancies by stimulating tumor cell proliferation, survival, evasion and metastasis as well as host angiogenesis.

In addition, PGE2 suppresses anti-tumor immunity by inhibiting the function of critical anti-tumor immune effector cell populations such as dendritic cells, natural killer ("NK cells"), T cells, and M1 macrophages, while promoting the activity of suppressive immune cell populations including myeloid-derived suppressor cells ("MDSCs"), M2 macrophages, and regulatory T cells.

Additionally, recent studies have shown that increased expression of COX-2 and production of PGE2 can play a role in the effectiveness of immune checkpoint inhibitor therapy and in the development of adaptive resistance to therapy.

This body of literature provides the

scientific rationale for developing therapeutics that maximally inhibit the prostaglandin pathway, as well as for combining TPST-1495 with immune checkpoint inhibitor monoclonal antibodies.

Overall, as a dual antagonist targeting EP2 and EP4 while preserving PGE2 signaling through EP1 and EP3 to maintain functional immunity, we believe that TPST-1495 offers the potential for unique therapeutic properties as compared to either broad inhibition of PGE2 signaling via COX inhibitors or EP4 only.

We conducted preclinical studies to evaluate the ability of TPST-1495 to reverse PGE2-mediated suppression of primary human monocyte to dendritic cell differentiation and activation in vitro, as well as the comparative capacity for TPST-1495 and the single EP4 antagonist E7046 (TPST-7317) to reverse prostaglandin-mediated immune suppression in conditions of both high and low PGE2 concentrations in human monocyte cultures in vitro in order to test the capacity of TPST-1495 to reverse immune suppression in a broad range of PGE2 levels that may encompass the range in the tumor microenvironment, or TME.

The data from the results suggest that at appropriate dose levels, TPST-1495 may completely block signaling through both EP2 and EP4 pathways in the TME and that this dual blockade is more effective than EP4 blockade alone to reverse PGE2-mediated immune suppression.

We also conducted preclinical studies using several tumor mouse models to evaluate the anti-tumor activity of TPST-1495 and to compare our potency to a single EP4 antagonist, E7046, developed by Eisai Co.

We believe that these results demonstrate that TPST-1495 has increased therapeutic activity in tumor-bearing mouse models and has significantly improved anti-tumor activity compared to single EP4 antagonists.

As shown in the Figure below, TPST-1495 demonstrated significant efficacy as a monotherapy when given to Balb/c mice bearing established flank CT26 colon tumors.

Administration of TPST-1495 at 100 mg/kg twice a day, or BID, significantly increased the total T cell number and percentage of CD4+ and CD8+ T cells within the tumor compared to vehicle control, and consistent with increased T cells in the TME, the absolute number and frequency of AH1 tetramer+ T cells was also significantly elevated in the tumor draining lymph node.

TPST-1495 Anti-Tumor Response in Mice Correlates with Increased CD8+ T cells

and Reduced regs in the TME

We also evaluated the anti-tumor activity of TPST 1495 in a spontaneous mouse model which recapitulates many aspects of human CRC.

The so-named ApcMin/+ mice harbor one copy of the multiple intestinal neoplasia (Min) mutant allele of the Apc locus and spontaneously develop multiple tumors primarily in the small intestine.

Both humans and mice bearing Apc mutations are predisposed to the spontaneous formation of adenomas and adenocarcinomas;

humans with Apc mutations typically develop tumors throughout the small and large intestine.

To test the impact of TPST-1495 therapy on small intestine tumor development in the ApcMin/+ model, the anti-tumor efficacy of dual antagonism of EP2 and EP4 receptors by TPST-1495 was compared to a single EP4-specific receptor antagonist, TPST-7317 (Eisai/ Adlai Nortye Biopharma).

As shown in the Figure below, TPST-7317 did not significantly inhibit the number and/or size of small intestine tumors, whereas treatment with TPST-1495 resulted in an approximately five-fold reduction in tumors compared to control mice.

We believe that these results demonstrate that TPST-1495 has potent anti-tumor activity as monotherapy and that antagonizing both EP2 and EP4 is significantly more effective at reducing tumor lesions in ApcMin/+ mice compared to single EP4 antagonists.

Dual EP2 and EP4 Antagonism with TPST-1495 has Significantly Increased Anti-Tumor Potency

Compared to a Single EP4 Antagonist in the APC Mouse Model of Human CRC

Significance:

* p < 0.05, *** = p < 0.001, **** = p < 0.0001;

TPST-7317 is E7046 single EP4 antagonist developed by Eisai

Overview of Ongoing TPST-1495 Phase 1a/1b Clinical Trial

TPST-1495 is being evaluated in an ongoing first-in-human, Phase 1, multicenter, open-label, schedule and dose optimization and expansion trial in subjects with advanced solid tumors.

Study objectives include evaluation of safety, tolerability, PK, pharmacodynamics, or PD, and preliminary anti-tumor activity of TPST-1495 as monotherapy and in combination with the checkpoint inhibitor, pembrolizumab.

During the currently enrolling schedule and dose optimization stage.

TPST-1495 has been evaluated on a once daily (“QD”) or twice daily (“BID”) schedule and with continuous or intermittent administration as monotherapy and in combination with pembrolizumab.

Subjects with all histologic types of solid tumors are eligible, but enrollment of subjects with certain histologies, such as colorectal cancer, and endometrial cancer are preferred because the data from preclinical studies and gene expression profiling from primary human tumors indicate that these tumor types may be particularly susceptible to an anti-EP2 and anti-EP4 dual antagonist.

Shown in the figure below, preliminary PK analysis shows a nearly linear, dose-proportional, relationship of steady state drug exposure to administered dose of TPST-1495, representing data from subjects receiving TPST-1495 on once-daily and twice-daily as well as continuous and intermittent dosing schedules.

TPST-1495 Steady-State Concentration by Dose Level

Abbreviations:

BID = twice a day;

IC 50 = half maximal inhibitory concentration.

For BID administration, Day 1 PK is following a single dose, Day 8 is BID, and Day 22 is BID.

Error bars are standard deviations around the mean.

Our PD assessment in subjects treated with TPST-1495 includes both a PGE2 whole blood immune suppression assay conducted with patient blood and measurements of a stable metabolite of PGE2, known as PGEM, in the urine.

Shown in the Figure below, the PD results indicate target engagement in subjects dosed with 100 mg, 25 mg or 15 mg of TPST-1495, as indicated by the reversal of PGE2 immune suppression in the whole blood assay, as indicated by the increase of TNFα production due to TPST-1495 exposure in whole blood monocytes upon lipopolysaccharide (LPS) stimulation and suppression of exogenously added PGE2.

We have also observed increased levels of PGEM in the urine, resulting from TPST-1495 antagonism of EP2 and EP4 receptors (inferred through measurement of the PGEM metabolite).

Recovery of TNF-a Production in Whole Blood on the First Day Following Dosing of TPST-1495

Percent increase of TNF-α measured in subjects’ whole blood as indicated by ELISA following stimulation with LPS alone with and without exogenously added PGE2 sampled at the times indicated in the legend post dosing.

The values expressed reflect the percent recovery of TNF-α production observed in the presence of PGE2 and TPST-1495 in subject plasma as compared to the level TNF-α production in subject plasma stimulated with LPS alone (without PGE2).

Once the TPST-1495 RP2D and schedule are identified, with additional funding, we plan to open a study expansion stage to further evaluate TPST-1495 in selected cancer indications that are strongly associated with prostaglandin signaling and high expression of EP2 and EP4 receptors, including a so-called “basket cohort” for patients with a tumor mutation in the PIK3A gene.

The co-primary objectives of the expansion cohorts are to further characterize the safety profile of TPST-1495 and to assess its preliminary anti-tumor activity as monotherapy in these selected patient populations.

Additional exploratory objectives in the expansion cohorts would focus upon characterizing the immunomodulatory activity of TPST-1495 in treated subjects in blood and in the tumor microenvironment, as well as characterization of potential predictive biomarkers for patient selection, such as the PGE2 metabolite known as PGEM.

We expect to identify the TPST-1495 monotherapy RP2D and, with additional funding, to initiate the monotherapy expansion stage in the first half of 2022, and to identify the combination RP2D by the end of 2022 from the ongoing combination study with pembrolizumab.

We own worldwide rights to TPST-1495, and have filed and been issued patents, including composition of matter and pharmaceutical compositions, that are expected to expire between April 2038 and October 2042.

Preclinical Programs

TREX-1 Inhibitor Program

We believe that the exonuclease TREX-1 may be the optimal approach to drug the STING pathway with an orally available small molecule inhibitor.

Extensive genetic evidence from human disease that has been confirmed in numerous mouse knock-out investigations point to the STING pathway as a critical innate immune sensor for the development of anti-tumor immunity.

Although the STING pathway has significant scientific validation, clinical trials utilizing synthetic cyclic dinucleotide STING agonists have been somewhat disappointing.

The underlying scientific hypothesis for these clinical trials was that localized T cell priming in the lymph nodes draining from the injected tumor would have activity against non-injected distal tumors, referred to as the "abscopal effect." Because metastatic tumors have unique antigenic repertoires, we believe an effect therapeutic would need to catalyze global innate activation in the TME of multiple metastases in order to prime T cells that can recognize and eradicate distinct tumors.

However, we believe it would be difficult to achieve a therapeutic index with systemically delivered STING-agonists due to the ubiquitous expression of the target as a central innate immune receptor.

Shown in the figure below, TREX-1 is a cytosolic exonuclease that inhibits activation of the cGAS/ STING pathway by degrading double-stranded ("ds") DNA in the cytoplasm.

TREX-1 expression is increased across diverse malignancies, for multiple reasons, including defects in DNA repair mechanism and particular therapeutic interventions such as DNA-modifying chemotherapeutic agents or radiation.

The increased expression of TREX-1 in tumors serves as the foundational scientific evidence that tumors can hijack this pathway to prevent activation of the STING pathway and avoid globimmune recognition.

In contrast to administering a direct STING agonist systemically, we believe that systemic oral dosing with a potent and specific TREX-1 inhibitor will activate the STING pathway selectively in the "TME" and prime cytolytic CD8+ T cells broadly in tumor draining lymph nodes, thereby serving distinct metastatic lesions having unique antigenic repertoires.

TREX-1 DNA Exonuclease Modulates cGAS/STING Pathway and Innate Immunity

Utilizing published TREX1 X-ray crystal structures to guide medicinal chemistry, we have developed small molecule inhibitors of TREX1 with drug-like physicochemical properties and picomolar potency against both human and mouse TREX1.

In preclinical studies, we observed anti-tumor activity in mice with CT26 tumors given a combined therapy of low-dose doxorubicin to induce dsDNA breaks and increase TME TREX1 expression along with administration of a TREX1 small molecule inhibitors.

We plan to continue to conduct SAR activities on our TREX1 inhibitor lead series compounds towards selecting a development candidate for IND-enabling studies and eventual clinical evaluation in patients with advanced solid tumor malignancies.

Undisclosed Target Program

In September 2021, we announced that we entered into an exclusive license agreement with the University of California at Berkeley for intellectual property covering a novel drug target that is a component of, to our knowledge, a newly defined pathway that controls the production of a cytokine that tumors can evolve to block to avoid immune recognition and promote metastasis.

Interestingly, the target is a suppressor protein, so is predictably not inactivated by progressing tumors and therefore should remain a target for drug inactivation.

License agreements

In February 2021, we entered into a collaboration agreement with Roche to accelerate the development of TPST-1120 into a first-line, randomized study.

Under the terms of the agreement, the companies are evaluating TPST-1120 in a global randomized phase 1b/2 clinical study in combination with the standard-of-care first-line regimen of atezolizumab and bevacizumab in patients with advanced or metastatic HCC, not previously treated with systemic therapy.

Pursuant to the terms of the agreement, Roche is managing the study operations for the trial, and we will retain global development and commercialization rights to TPST-1120.

According to the agreement, Roche will provide us with notice of the amount of TPST-1120 required for a study and the delivery timeline, and we will supply the TPST-1120 to Roche for the study.

All rights to invention and discoveries relating solely to TPST-1120 or biomarkers solely related to TPST-1120 made during any study will be our exclusive property.

All data generated in the performance of any study under the collaboration agreement will be the property of Roche, but we are entitled to use the data for any lawful purpose.

The agreement applies on a study-by-study basis until the last treatment of the last patient in a study receiving TPST-1120 in accordance with the protocol for such study or until the termination of this collaboration agreement by either party.

Each party has the right to terminate the collaboration agreement upon 60 days prior written notice to the other party.

Upon any termination of the agreement, neither we nor Roche will be entitled to any compensation, damages or other payment.

If any individual study supplement is terminated, Roche must return all unused TPST-1120 to us free of charge or destroy such product at our request.

Sales and Marketing

We are not currently conducting sales and marketing efforts with respect to any of our previous programs and are in the process of terminating the license agreements pursuant to which we had development and commercialization rights with respect to livoletide, nevanimibe and MLE-301.

Research and Development

We are not currently conducting research and development of any of our previous programs and our plans for future research and development are dependent on the results of our ongoing strategic evaluation.

Assignment Agreement with Erasmus University Medical Center and the University of Turin

We have an assignment agreement (the “Assignment Agreement”) with Erasmus University Medical Center, the University of Turin and certain individuals, which we refer to collectively as the assignors, for certain patents and patent applications relating to livoletide.

In connection with the Assignment Agreement, we agreed to pay the assignors a flat, low single digit royalty on net commercial sales of products containing livoletide that are covered by the claims of the assigned intellectual property.

Further, upon approval of livoletide by the FDA or EMA, we are required to pay the assignors CDN$100,000, which amount will be deducted from any future royalty payments due to the assignors.

We also agreed to pay the assignors a low single digit percentage of any amounts received in connection with our license of the assigned intellectual property or products containing livoletide that are covered by the claims of the assigned intellectual property.

The assignors have a right to repurchase the assigned intellectual property at a certain price in the event we do not, upon receiving notice, use reasonable efforts to develop, introduce for sale and promote products derived from the assigned intellectual property.

Such reasonable efforts involve spending an annual amount of at least CDN$100,000 in research and development related to livoletide, actively pursuing the registration, licenses and permits necessary to market livoletide, and the actual commercialization of livoletide, if approved.

In addition, pursuant to the assignment agreement, certain individuals at the Erasmus University Medical Center and the University of Turin were granted non-exclusive rights to use the assigned intellectual property for non-commercial research with our prior written consent.

In March 2021, we notified the assignors that we had discontinued the PWS program.

License Agreement with the University of Michigan

In June 2013, we entered into a license agreement with the University of Michigan, or the UM License Agreement, for a worldwide, exclusive, sublicensable license to the University of Michigan’s interest in certain patent rights jointly owned with us, covering, among other things, the use of nevanimibe to treat CAH.

Such license rights allowed us to make, have made, import, export, use, market, offer for sale and sell products containing nevanimibe for such use in the United States.

Due to our decision to cease investing in the nevanimibe program, effective on March 5, 2021, we notified the University of Michigan of our decision to terminate the UM License Agreement, which termination shall be effective April 30, 2021, as agreed to by the University of Michigan.

License Agreement with Roche

On October 16, 2018, we entered into a license agreement with F.

Hoffmann-La Roche Ltd and Hoffman-La Roche Inc.

(collectively, “Roche”), for a worldwide, exclusive license to Roche's interest in certain patent rights and know-how covering, among other things, the use of a neurokinin 3 receptor antagonist (the "Roche License Agreement").

Such license rights have allowed us to research, have researched, develop, have developed, register, have registered, use, have used, make, have made, import, have imported, export, have exported, market, have marketed, distribute, have distributed, sell and have sold an NK3R antagonist for use in all countries in the world and for all other uses other than diagnostic use.

Due to our decision to discontinue investing in the MLE-301 program, in March 2021, we notified Roche that we were terminating the Roche License Agreement effective three months from the date of such notice.

Intellectual Property

When applicable to our development programs, we seek to obtain and maintain patent and other intellectual property and proprietary protection for our drug candidates in the United States and internationally, including composition-of-matter, dosage and formulation patents, as well as patent and other intellectual property and proprietary protection for our novel biological discoveries and other important technology inventions and know-how.

In addition to patents, we rely upon unpatented trade secrets, know-how, and continuing technological innovation to develop and maintain our intellectual property rights.

We protect our proprietary information, in part, using confidentiality agreements with our commercial partners, collaborators, employees and consultants and invention assignment agreements with our employees as well as selected commercial partners and consultants.

Despite these measures, any of our intellectual property and proprietary rights could be challenged, invalidated, circumvented, infringed or misappropriated, or such intellectual property and proprietary rights may not be sufficient to permit us to take advantage of current market trends or otherwise to provide competitive advantages.

In addition, such confidentiality agreements and invention assignment agreements can be breached and we may not have adequate remedies for any such breach.

For more information, please see “ Risk Factors—Risks Related to Our Intellectual Property .”

We seek patent protection in significant markets and/or countries for each drug in development.

We also seek to maximize patent term.

The patent exclusivity period for a drug will prevent generic drugs from entering the market.

Patent exclusivity depends on a number of factors including the strength of the claims, the initial patent term, patent term adjustments and available patent term extensions based upon delays caused by the regulatory approval process.

The patent positions of biotechnology companies like ours are generally uncertain and involve complex legal, scientific and factual questions.

In addition, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance.

Consequently, we may not obtain or maintain adequ ate patent protection for any of our product candidates.

As of December 31, 2020, with respect to livoletide patent rights, we owned four issued U.S.

patents, one pending U.S.

patent application, and a number of patents and pending patent applications in other jurisdictions.

As of December 31, 2020, with respect to nevanimibe patent rights, we owned two issued U.S.

patents, two pending U.S.

patent applications, and a number of pending patent applications in other jurisdictions, and we jointly owned, with University of Michigan, three issued U.S.

patents, one pending U.S.

patent application, and a number of patent applications in other jurisdictions.

As of December 31, 2020, with respect to MLE-301 patent rights, we owned one pending U.S.

patent application, and we exclusively licensed from Roche one issued U.S.

patent and a number of patents and pending patent applications in other jurisdictions.

We cannot predict whether the patent applications we pursue will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide any proprietary protection from competitors.

The patent portfolios for our leading product candidates as of December 31, 2020 are summarized below.

With respect to livoletide patent rights, as of December 31, 2020 we owned four issued U.S.

patents, which are not due to expire before 2028, 2028, 2029, and 2033, respectively, excluding any additional term for patent term extension pursuant to the Hatch-Waxman Act;

one pending U.S.

patent application, which is not due to expire before 2034, excluding any additional term for patent term adjustment or extension;

and a number of patent applications in other jurisdictions.

The foregoing patents and patent applications cover a form of and methods of making and using livoletide or its analogs.

Related international patent applications have issued in Australia, Canada, China, Europe, Japan, and Mexico and are pending in a number of other countries, including Canada, Europe, and India.

In March 2021, in connection with the discontinuation of our livoletide program, we notified the assignors of our decision to discontinue development of livoletide.

We do not expect our livoletide patents to enable development of livoletide apart from the intellectual property licensed.

With respect to nevanimibe patent rights, as of December 31, 2020, we owned two issued U.S.

patents, which are not due to expire before 2035, excluding any additional term for patent term adjustment or extension;

two pending U.S.

patent applications, which, if issued, are not due to expire before 2035 and 2036, respectively, excluding any additional term for patent term adjustment or extension;

and a number of patent applications in other jurisdictions.

As of December 31, 2020, we jointly owned, with University of Michigan, three issued U.S.

patents, which are each not due to expire before 2033, excluding any additional term for patent term adjustments or extensions;

one pending U.S.

patent application, which, if issued, is not due to expire before 2033, excluding any additional term for patent term adjustment or extension;

and a number of patent applications in other jurisdictions.

The foregoing patents and patent applications cover a form of and methods of making and using nevanimibe or its analogs.

Related international patent applications have issued in Australia, China, Japan, Mexico, and New Zealand and are pending in a number of other countries, including Australia, Brazil, Canada, China, Europe, and Mexico.

Due to our decision to discontinue the development of our nevanimibe program, in March 2021, we notified the University of Michigan of our decision to terminate the UM License Agreement, which termination shall be effective as of April 30, 2021, as agreed with the University of Michigan.

We do not expect our nevanimibe patents to enable development of nevanimibe apart from the intellectual property licensed pursuant to the UM License Agreement.

With respect to MLE-301 patent rights, as of December 31, 2020, we owned one pending Patent Cooperation Treaty patent application, which, if issued, is not due to expire before 2040, excluding any additional term for patent term adjustment or extension.

As of December 31, 2020, we exclusively licensed from Roche one issued U.S.

patent, which is not due to expire before 2031, excluding any additional term for patent term adjustment or extension.

The foregoing patents and patent applications cover a form of and methods of making and using MLE-301 or its analogs.

Related international patent applications have issued in China, Europe, Japan, South Korea, and Mexico, and are pending in a number of other countries,

including Brazil, Canada, India, and Russia.

Due to our decision to discontinue developing the MLE-301 program in March 2021, we notified Roche that we were terminating the Roche License Agreement effective three months from the date of such notice.

We do not expect our MLE-301 patents to enable development of MLE-301 apart from the intellectual property licensed pursuant to the Roche License Agreement.

We intend to retain significant development and commercial rights to our product candidates and, if marketing approval is obtained, to commercialize our product candidates on our own, or potentially with a partner, in the United States and other regions.

We currently have no sales, marketing or commercial product distribution capabilities.

We intend to build the necessary infrastructure and capabilities over time for the United States, and potentially other regions, following further advancement of our product candidates.

Clinical data, the size of the addressable patient population, the size of the commercial infrastructure and manufacturing needs may all influence or alter its commercialization plans.

If we build a commercial infrastructure to support marketing in North America, such commercial infrastructure could be expected to include a targeted sales force supported by sales management, internal sales support, an internal marketing group and distribution support.

To develop the appropriate commercial infrastructure internally, we would have to invest financial and management resources, some of which would have to be deployed prior to any confirmation that one of our product candidates will be approved.

Manufacturing

We relied on contract manufacturing organizations, or CMOs, to produce drug candidates in accordance with the FDA’s current Good Manufacturing Practices, or cGMP, regulations for use in our prior clinical trials.

The manufacture of pharmaceuticals is subject to extensive cGMP regulations, which impose various procedural and documentation requirements and govern all areas of record keeping, production processes and controls, personnel and quality control.

Government Regulation and Approval

United States-FDA process

In the United States, the FDA regulates drugs.

The Federal Food, Drug, and Cosmetic Act, or FDCA, and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of drugs.

To obtain regulatory approvals in the United States and in foreign countries, and subsequently comply with applicable statutes and regulations, we will need to spend substantial time and financial resources.

Approval process

The FDA must approve any new drug or a drug with certain changes to a previously approved drug before a manufacturer can market it in the United States.

If a company does not comply with applicable United States requirements it may be subject to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending applications, warning or untitled letters, clinical holds, drug recalls, drug seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, and criminal prosecution.

The steps we must complete before we can market a drug include:

• completion of preclinical laboratory tests, animal studies, and formulation studies, all performed in accordance with the FDA’s good laboratory practice, or GLP, regulations;

• submission to the FDA of an IND application for human clinical testing, which must become effective before human clinical studies start.

The sponsor must update the IND annually;

• approval of the study by an independent institutional review board, or IRB, or ethics committee representing each clinical site before each clinical study begins;

• performance of adequate and well-controlled human clinical studies to establish the safety and efficacy of the drug for each indication to the FDA’s satisfaction;

We do not own or operate, and currently have no plans to establish, any manufacturing facilities.

We rely and expect to continue to rely, on third parties for the manufacture of our product candidates for preclinical and clinical testing, as well as for commercial manufacture if any of our product candidates obtain marketing approval.

We also rely, and expect to continue to rely, on third parties to package, label, store and distribute our investigational product candidates, as well as for our commercial products if marketing approval is obtained.

We have internal personnel and utilize consultants with extensive technical, manufacturing, analytical and quality experience to oversee contract manufacturing and testing activities.

We will continue to expand and strengthen our network of third-party providers but may also consider investing in internal manufacturing capabilities in the future if there is a technical need, or a strategic or financial benefit.

Manufacturing is subject to extensive regulations that impose procedural and documentation requirements.

At a minimum these regulations govern record keeping, manufacturing processes and controls, personnel, quality control and quality assurance.

Our systems, procedures and contractors are required to be in compliance with these regulations and are assessed through regular monitoring and formal audits.

The biopharmaceutical and immuno-oncology industries are characterized by intense competition and rapid innovation.

Any product candidates that we successfully develop and commercialize will have to compete with existing and future new therapies.

While we believe that our technology, development experience and scientific knowledge provide us with competitive advantages, we face potential competition from many different sources, including large and specialty pharmaceutical and biotechnology companies, academic research institutions, government agencies and public and private research institutions that conduct research, seek patent protection, and establish collaborative arrangements for research, development, manufacturing and commercialization.

If our TPST-1120, TPST-1495, or our other product candidates are approved for the treatment of tumors, they may compete with other products used to treat such diseases.

There are a variety of treatments used for cancerous tumors that include chemotherapy drugs, small molecules, monoclonal antibodies, antibody-drug conjugates, bi-specific antibodies, cell therapies, oncolytic viruses and vaccines, as well as other approaches.

In addition, there are several competitors in clinical development for the treatment of HCC, RCC, cholangiocarcinoma, CRC and other indications that we may be targeting with TPST-1120 and TPST-1495, including companies such as Agios, Ikena, Ono, Adlai Nortye, Merck, Roche, Exelixis, and AstraZeneca.

TPST-1120, our small molecule designed to be a selective antagonist of PPARα, is the first PPARα antagonist in the clinic.

We are not aware of other companies developing such an antagonist.

For TPST-1495, our small molecule designed to be a dual antagonist of the EP2 and EP4 receptor, we are aware of other clinical-stage EP-4-only antagonists being developed by Adlai Nortye, Ikena, and Ono.

Many of our competitors, either alone or with strategic partners, have substantially greater financial, technical and human resources than we do.

Accordingly, our competitors may be more successful than us in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining approval for treatments and achieving widespread market acceptance, rendering our treatments obsolete or non-competitive.

Merger and acquisition activity in the biotechnology and biopharmaceutical industries may result in even more resources being concentrated among a smaller number of our competitors.

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

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

Our commercial opportunity could be substantially limited if our competitors develop and commercialize products that are more effective, safer, less toxic, more convenient or less expensive than our comparable products.

In geographies that are critical to our commercial success, competitors may also obtain regulatory approvals before us, resulting in our competitors building a strong market position in advance of the entry of our products.

The key competitive factors affecting the success of all of our programs are likely to be their efficacy, safety, convenience and availability of reimbursement.

In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use of generic drugs.

Intellectual property

We strive to protect and enhance the proprietary technology, inventions and improvements that are commercially important to our business, including obtaining, maintaining and defending our patent rights.

Our policy is to seek to protect our proprietary position by, among other methods, filing patent applications and obtaining issued patents in the United States and in markets outside of the United States directed to our proprietary technology, inventions, improvements and product candidates that are important to the development and implementation of our business.

We also rely on trade secrets and know-how relating to our proprietary technology and product candidates and continuing innovation to develop, strengthen and maintain our proprietary position in the field of oncology.

We also plan to rely on data exclusivity, market exclusivity and patent term extensions when available.

Our commercial success will depend in part on our ability to obtain and maintain patent and other proprietary protection for our technology, inventions, improvements, and product candidates;

to preserve the confidentiality of our trade secrets;

to defend and enforce our proprietary rights, including any patents that we may own or license in the future;

and to operate without infringing on the valid and enforceable patents and other proprietary rights of third parties.

As of December 31, 2021, our patent portfolio consisted of issued patents and pending patent applications that we own or in-licensed related to TPST-1120, TPST-1495 and various other compounds and programs, such as TREX1.

In total, as of that date, we owned two issued United States patents, six pending United States patent applications, one international patent application filed under the Patent Cooperation Treaty (PCT application), and in various markets outside of the United States, including Europe, China and Japan:

26 issued patents and 28 pending patent applications.

With respect to TPST-1120, we own issued patents and pending patent applications in the United States, Europe, China, Japan and other markets outside of the United States.

The issued United States patents covering TPST-1120 as composition of matter, pharmaceutical compositions, and related methods of use are expected to expire in December 2033, absent any patent term extensions for regulatory delay.

Any additional patents that may issue from these pending patent applications are expected to expire in December 2033, absent any patent term adjustments or patent term extensions for regulatory delay.

With respect to TPST-1495, we own issued patents and pending patent applications in the United States, Europe, China, Japan and other markets outside of the United States.

The issued United State patents covering TPST-1495 as composition of matter and pharmaceutical composition are expected to expire between April 2038 and April 2039, absent any patent term extensions for regulatory delay.

Any additional patents that may issue from these pending patent applications are expected to expire between April 2038 and October 2042, absent any patent term adjustments or patent term extensions for regulatory delay.

With respect to TREX-1, we own pending patent applications in the United States and Taiwan and a pending PCT application.

Any patents that may issue from these pending patent applications are expected to expire between June 2041 and December 2042, absent any patent term adjustments or patent term extensions for regulatory delay.

As of December 31, 2021, our patent portfolio also included a pending patent application in the United States that is exclusively licensed to us by the University of California at Berkeley.

The licensed patent application does not cover any of our current product candidates.

We also possess substantial know-how and trade secrets relating to the development and commercialization of our product candidates, including related manufacturing processes and technology.

With respect to our product candidates and processes that we intend to develop and commercialize in the normal course of business, we intend to pursue patent protection covering, when possible, compositions, methods of use, dosing and formulations.

We may also pursue patent protection with respect to manufacturing and drug development processes and technologies.

Issued patents can provide protection for varying periods of time, depending upon the date of filing of the patent application, the date of patent issuance and the legal term of patents in the countries in which they are obtained.

In general, patents issued for patent applications filed in the United States can provide exclusionary rights for 20 years from the earliest effective filing date.

The term of United States patents may be extended by delays encountered during prosecution that are caused by the USPTO, also known as patent term adjustment.

In addition, in certain instances, the term of an issued United States patent that covers or claims an FDA approved product can be extended to recapture a portion of the term effectively lost as a result of the FDA regulatory review period, which is called patent term extension.

The restoration period cannot be longer than five years and the total patent term, including the restoration period, must not exceed 14 years following FDA approval.

The term of patents outside of the United States varies in accordance with the laws of the foreign jurisdiction, but typically is also 20 years from the earliest effective filing date.

However, the actual protection afforded by a patent varies on a product-by-product basis, from country-to-country and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-related extensions, the availability of legal remedies in a particular country and the validity and enforceability of the patent.

The patent positions of companies like ours are generally uncertain and involve complex legal and factual questions.

No consistent policy regarding the scope of claims allowable in patents in the field of oncology has emerged in the United States.

The relevant patent laws and their interpretation outside of the United States are also uncertain.

Changes in either the patent laws or their interpretation in the United States and other countries may diminish our ability to protect our technology or product candidates and could affect the value of such intellectual property.

In particular, our ability to stop third parties from making, using, selling, offering to sell or importing products that infringe our intellectual property will depend in part on our success in obtaining and enforcing patent claims that cover our technology, inventions and improvements.

We cannot guarantee that patents will be granted with respect to any of its pending patent applications or with respect to any patent applications we may file in the future, nor can we be sure that any patents that may be granted to us in the future will be commercially useful in protecting its products, the methods of use or manufacture of those products.

Moreover, even its issued patents may not guarantee us the right to practice our technology in relation to the commercialization of its products.

Patent and other intellectual property rights in the pharmaceutical and biotechnology space are evolving and involve many risks and uncertainties.

For example, third parties may have blocking patents that could be used to prevent us from commercializing our product candidates and practicing our proprietary technology, and our issued patents may be challenged, invalidated or circumvented, which could limit our ability to stop competitors from marketing related products or could limit the term of patent protection that otherwise may exist for its product candidates.

In addition, the scope of the rights granted under any issued patents may not provide us with protection or competitive advantages against competitors with similar technology.

Furthermore, our competitors may independently develop similar technologies that are outside the scope of the rights granted under any issued patents.

For these reasons, we may face competition with respect to our product candidates.

Moreover, because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that, before any particular product candidate can be commercialized, any patent protection for such product may expire or remain in force for only a short period following commercialization, thereby reducing the commercial advantage the patent provides.

Government regulation

Government authorities in the United States at the federal, state and local level and in other countries and jurisdictions extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and

export and import of pharmaceutical products, such as our investigational medicines and any future investigational medicines.

Generally, before a new pharmaceutical product can be marketed, considerable data demonstrating its quality, safety and efficacy must be obtained, organized into a format specific for each regulatory authority, submitted for review and approved by the regulatory authority.

FDA Approval Process

In the United States, pharmaceutical products are subject to extensive regulation by the FDA, the Federal Food, Drug, and Cosmetic Act, and other federal and state statutes and regulations govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling and import and export of pharmaceutical products.

Failure to comply with applicable U.S.

requirements may subject a company to a variety of administrative or judicial sanctions, such as clinical hold, FDA refusal to approve pending a New Drug Applications ("NDA") warning or untitled letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution.

Our investigational medicines and any future investigational medicines must be approved by the FDA pursuant to an NDA before they may be legally marketed in the United States.

The process generally involves the following:

• Completion of extensive preclinical laboratory and animal studies in accordance with applicable regulations, including studies conducted in accordance with Good Laboratory Practice ("GLP") requirements;

• Submission to the FDA of an IND, which must become effective before human clinical trials may begin;

• Approval by an Institutional Review Board ("IRB") or independent ethics committee at each clinical trial site before each clinical trial may be commenced;

• Performance of adequate and well-controlled human clinical trials in accordance with applicable IND regulations, Good Clinical Practice (“GCP”) requirements and other clinical trial-related regulations to establish the safety and efficacy of the investigational product for each proposed indication;

• Submission to the FDA of an NDA;

• potential review of the drug application by an FDA advisory committee, where appropriate and if applicable;

• satisfactory completion of an FDA inspection of the manufacturing facility or facilities to assess compliance with current good manufacturing practices, cGMP, or regulations;

• FDA review and approval of the NDA.

It generally takes companies many years to satisfy the FDA approval requirements, but this varies substantially based upon the type, complexity, and novelty of the drug or disease.

Preclinical tests include laboratory evaluation of a drug’s chemistry, formulation, and toxicity, as well as animal trials to assess the characteristics and potential safety and efficacy of the drug.

• Payment of any user fees for FDA review of an NDA;

• A determination by the FDA within 60 days of its receipt of an NDA to accept the filing for review;

• Satisfactory completion of one or more FDA pre-approval inspections of the manufacturing facility or facilities where the drug, or components thereof, will be produced to assess compliance with Good Manufacturing Practices (“cGMP”) requirements to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity;

• Satisfactory completion of any potential FDA audits of the clinical trial sites that generated the data in support of the NDA to assure compliance with GCPs and integrity of the clinical data;

• FDA review and approval of an NDA, including consideration of the views of any FDA advisory committee;

• Compliance with any post-approval requirements, including risk evaluation and mitigation strategy (“REMS”), where applicable, and post-approval studies required by the FDA as a condition of approval.

The preclinical and clinical testing and approval process requires substantial time, effort and financial resources, and we cannot be certain that any approvals for our product candidates will be granted on a timely basis, or at all.

Preclinical Studies

Before testing any drug product candidates in humans, the product candidate must undergo rigorous preclinical testing.

Preclinical tests include laboratory evaluation of product chemistry, formulation and toxicity, as well as in vitro and animal studies to assess the potential for adverse events and in some cases to establish a rationale for therapeutic use.

The conduct of the preclinical tests must comply with federal regulations and requirements, including GLP.

The company submits the results of the preclinical testing to the FDA as part of an IND along with other information, including information about the product drug’s chemistry, manufacturing and controls, and a proposed clinical study protocol.

Long term preclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, are generally conducted after submitting the initial IND.

The FDA requires a 30-day waiting period after the submission of each IND before the company can begin clinical testing in humans in the United States.

The FDA may, within the 30-day time period, raise concerns or questions relating to one or more

proposed clinical studies and place the study on a clinical hold.

In such a case, the company and the FDA must resolve any outstanding concerns before the company begins the clinical study.

Accordingly, the content of an IND submission may or may not be sufficient for the FDA to permit the sponsor to start a clinical study.

The company must also make a separate submission to an existing IND for each successive clinical study conducted in the U.S.

during drug development.

Clinical studies

Clinical studies involve administering the investigational new drug to healthy volunteers or patients under the supervision of a qualified investigator.

The company must conduct clinical studies:

• in compliance with federal regulations;

• in compliance with good clinical practice, or GCP, an international standard meant to protect the rights and health of patients and to define the roles of clinical study sponsors, administrators, and monitors;

• under protocols detailing the objectives of the trial, the safety monitoring parameters, and the effectiveness criteria.

The company must submit each protocol involving testing on United States patients and subsequent protocol amendments to the FDA as part of the IND.

The FDA may order the temporary, or permanent, discontinuation of a clinical study at any time, or impose other sanctions, if it believes that the sponsor is not conducting the clinical study in accordance with FDA requirements or presents an unacceptable risk to the clinical study patients.

The sponsor must also submit the study protocol and informed consent information for patients in clinical studies to an institutional review board for approval.

An IRB may halt the clinical study, either temporarily or permanently, for failure to comply with the IRB’s requirements, or may impose other conditions.

Companies generally divide the clinical investigation of a drug into three or four phases.

While companies usually conduct these phases sequentially, they are sometimes overlapped or combined.

The company evaluates the drug in healthy human subjects or patients with the target disease or condition.

These studies typically evaluate the safety, dosage tolerance, metabolism and pharmacologic actions of the investigational new drug in humans, the side effects associated with increasing doses, and if possible, gain early evidence on effectiveness.

The company administers the drug to a limited patient population to evaluate dosage tolerance and optimal dosage, identify possible adverse side effects and safety risks, and preliminarily evaluate efficacy.

The company administers the drug to an expanded patient population, generally at geographically dispersed clinical study sites, to generate enough data to statistically evaluate dosage, clinical effectiveness and safety, to establish the overall benefit-risk relationship of the investigational drug, and to provide an adequate basis for product approval.

In some cases, the FDA may condition approval of an NDA for a drug on the company’s agreement to conduct additional clinical studies after approval.

In other cases, a sponsor may voluntarily conduct additional clinical studies after approval to gain more information about the drug.

We typically refer to such post-approval studies as Phase 4 clinical studies.

A pivotal study is a clinical study that adequately meets regulatory agency requirements to evaluate a drug’s efficacy and safety to justify the approval of the drug.

Generally, pivotal studies are Phase 3 studies, but the FDA may accept results from Phase 2 studies if the study design provides a well controlled and reliable assessment of clinical benefit, particularly in situations in which there is an unmet medical need and the results are sufficiently robust.

The FDA, the IRB, or the clinical study sponsor may suspend or terminate a clinical study at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk.

Additionally, an independent group of qualified experts organized by the clinical study sponsor, known as a data safety monitoring board or committee, may oversee some clinical studies.

This group provides authorization for whether or not a study may move forward at designated checkpoints based on access to certain data from the study.

We may also suspend or terminate a clinical study based on evolving business objectives and the competitive climate.

Submission of an NDA

After a company completes the required clinical testing, it can prepare and submit an NDA to the FDA, who must approve the NDA before it can start marketing the drug in the United States.

An NDA must include all relevant data available from pertinent preclinical and clinical studies, including negative or ambiguous results as well as positive findings, together with detailed information relating to the drug’s chemistry, manufacturing, controls, and proposed labeling, among other things.

Data can come from company-sponsored clinical studies on a drug, or from a number of alternative sources, including studies initiated by investigators or studies not conducted under a U.S.

To support marketing authorization, the data we submit must be sufficient in quality and quantity to establish the safety and effectiveness of the investigational drug to the FDA’s satisfaction.

An IND sponsor must submit the

results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical studies, among other things, to the FDA as part of an IND.

An IND is a request for authorization from the FDA to administer an investigational product to humans and must become effective before human clinical trials may begin.

Some long-term preclinical testing may continue after an IND is submitted.

An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions related to one or more proposed clinical trials and places the trial on clinical hold.

In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin.

As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.

Clinical Trials

Clinical trials involve the administration of the investigational new drug to healthy volunteers or patients under the supervision of a qualified investigator, generally a physician not employed by or under the trial sponsor’s control.

Clinical trials must be conducted:

(i) in compliance with federal regulations;

(ii) in compliance with GCP, an international standard meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators and monitors;

as well as (iii) under protocols detailing, among other things, the objectives of the trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated in the trial.

Each protocol involving testing on U.S.

patients and subsequent protocol amendments must be submitted to the FDA as part of an IND.

Furthermore, each clinical trial must be reviewed and approved by an IRB for each institution at which the clinical trial will be conducted to ensure that the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits.

The IRB also approves the informed consent form that must be provided to each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed.

There also are requirements governing the reporting of ongoing clinical trials and completed clinical trial results to public registries.

Information about certain clinical trials, including clinical trial results, must be submitted within specific timeframes for publication on the www.clinicaltrials.gov website.

Information related to the product, patient population, phase of investigation, clinical trial sites and investigators and other aspects of the clinical trial is then made public as part of the registration.

Disclosure of the results of these clinical trials can be delayed in certain circumstances for up to two years after the date of completion of the trial.

A sponsor who wishes to conduct a clinical trial outside of the United States may, but need not, obtain FDA authorization to conduct the clinical trial under an IND.

If a foreign clinical trial is not conducted under an IND, the sponsor may submit data from the clinical trial to the FDA in support of an NDA.

The FDA will accept a well-designed and well-conducted foreign clinical trial not conducted under an IND if the clinical trial was conducted in accordance with GCP requirements, and the FDA is able to validate the data through an onsite inspection if deemed necessary.

Clinical trials are generally conducted in three sequential phases, known as Phase 1, Phase 2 and Phase 3:

• Phase 1 clinical trials generally involve a small number of healthy volunteers or disease-affected patients who are initially exposed to a single dose and then multiple doses of the product candidate.

The primary purpose of these clinical trials is to assess the metabolism, pharmacokinetics, pharmacologic action, side effect tolerability, safety of the product candidate, and, if possible, early evidence of effectiveness.

• Phase 2 clinical trials generally involve studies in disease-affected patients to evaluate proof of concept and/or determine the dosing regimen(s) for subsequent investigations.

At the same time, safety and further pharmacokinetic and pharmacodynamic information is collected, possible adverse effects and safety risks are identified, and a preliminary evaluation of efficacy is conducted.

• Phase 3 clinical trials generally involve a large number of patients at multiple sites and are designed to provide the data necessary to demonstrate the effectiveness of the product for its intended use, its safety in use and to establish the overall benefit/risk relationship of the product and provide an adequate basis for product labeling.

In most cases, the FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the efficacy of the drug.

These Phases may overlap or be combined.

For example, a Phase 1/2 clinical trial may contain both a dose-escalation stage and a dose expansion stage, the latter of which may confirm tolerability at the recommended dose for expansion in future clinical trials (as in traditional Phase 1 clinical trials) and provide insight into the anti-tumor effects of the investigational therapy in selected subpopulation(s).

Typically, during the development of oncology therapies, all subjects enrolled in Phase 1 clinical trials are disease-affected patients and, as a result, considerably more information on clinical activity may be collected during such trials than during Phase 1 clinical trials for non-oncology therapies.

A single Phase 3 or Phase 2 trial with other confirmatory evidence may be sufficient in rare instances to provide substantial evidence of effectiveness (generally subject to the requirement of additional post-approval studies).

The manufacturer of an investigational drug in a phase 2 or 3 clinical trial for a serious or life-threatening disease is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for expanded access.

Phase 1, Phase 2, Phase 3 and other types of clinical trials may not be completed successfully within any specified period, if at all.

The FDA, the IRB, or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including non-compliance with regulatory requirements or a finding that the patients are being exposed to an unacceptable health risk.

Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.

Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee.

This group provides authorization for whether a trial may move forward at designated checkpoints based on access to certain data from the trial.

Concurrent with clinical trials, companies usually complete additional animal studies and must develop additional information about the chemistry and physical characteristics of the drug as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements.

The manufacturing process must be capable of consistently producing quality batches of the product and, among other things, companies must develop methods for testing the identity, strength, quality, potency and purity of the final product.

Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the investigational medicines do not undergo unacceptable deterioration over their shelf life.

FDA Review Process

After completion of the required clinical testing, an NDA is prepared and submitted to the FDA.

FDA approval of an NDA is required before marketing of the product may begin in the U.S.

An NDA must include the results of all preclinical, clinical and other testing and a compilation of data relating to the product’s pharmacology, chemistry, manufacture and controls.

To support marketing approval, the data submitted must be sufficient in quality and quantity to establish the safety and efficacy of the investigational product to the satisfaction of the FDA.

FDA approval of an NDA must be obtained before a drug may be marketed in the United States.

The cost of preparing and submitting an NDA is substantial.

The submission of most NDAs is additionally subject to a substantial application user fee, and the manufacturer and/or sponsor under an approved new drug application are also subject to annual program user fees.

The FDA typically increases these fees annually.

Orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical study costs, tax advantages, and user-fee waivers.

The FDA has 60 days from its receipt of an NDA to determine whether it will accept the application for filing based on the agency’s threshold determination that the application is sufficiently complete to permit substantive review.

Once the FDA accepts the filing, the FDA begins an in-depth review.

The FDA has agreed to certain performance goals in the review of NDAs.

Under the Prescription Drug User Fee Act, the FDA has a goal of responding to standard review NDAs within ten months after the 60-day filing review period, but this timeframe may be extended.

The FDA reviews most applications for standard review drugs within ten to 12 months and most applications for priority review drugs within six to eight months.

Priority review can be applied to drugs that the FDA determines offer major advances in treatment, or provide a treatment where no adequate therapy exists.

The FDA may also refer applications for novel drugs that present difficult questions of safety or efficacy, to an advisory committee.

This is typically a panel that includes clinicians and other experts that will review, evaluate, and recommend whether the FDA should approve the application.

Under the Prescription Drug User Fee Act (“PDUFA”), each NDA must be accompanied by a substantial user fee.

The FDA adjusts the PDUFA user fees on an annual basis.

Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application filed by a small business.

Additionally, no user fees are assessed on NDAs for products designated as orphan drugs, unless the product also includes a non-orphan indication.

The applicant under an approved NDA is also subject to an annual program fee.

The FDA reviews each submitted NDA before it determines whether to file it and may request additional information.

The FDA must make a decision on whether to file an NDA within 60 days of receipt, and such decision could include a refusal to file by the FDA.

Once the submission is filed, the FDA begins an in-depth review of an NDA.

The FDA has agreed to certain performance goals in the review of an NDA.

Most applications for standard review drug products are reviewed within ten to twelve months;

most applications for priority review drugs are reviewed in six to eight months.

Priority review can be applied to drugs that the FDA determines may offer significant improvement in safety or effectiveness compared to marketed products or where no adequate therapy exists.

The review process for both standard and priority review may be extended by the FDA for three additional months to consider certain late-submitted information, or information intended to clarify information already provided in the submission.

The FDA does not always meet its goal dates for standard and priority timeframes for an NDA, and the review process can be extended by FDA requests for additional information or clarification.

The FDA may also refer applications for novel drug products, or drug products that present difficult questions of safety or efficacy, to an outside advisory committee—typically a panel that includes clinicians and other experts—for review, evaluation and a recommendation as to whether the application should be approved and under what conditions, if any.

The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations.

Before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP, and will inspect the facility or the facilities at which the drug is manufactured.

The FDA will not approve the drug unless compliance with cGMP is satisfactory and the NDA contains data that provide evidence that the drug is safe and effective in the indication studied.

The FDA’s decision on an NDA

After the FDA evaluates the NDA and the manufacturing facilities, it issues either an approval letter or a complete response letter.

A complete response letter indicates that the FDA has completed its review of the application, and the agency has determined that it will not approve the application in its present form.

A complete response letter generally outlines the deficiencies in the submission and may require substantial additional clinical data and/or other significant, expensive, and time-consuming requirements related to clinical studies, preclinical studies and/or manufacturing.

The FDA has committed to reviewing resubmissions of the NDA addressing such deficiencies in two or six months, depending on the type of information included.

Even if we submit such data, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval.

Also, the government may establish additional requirements, including those resulting from new legislation, or the FDA’s policies may change, which could delay or prevent regulatory approval of our drugs under development.

An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications.

As a condition of NDA approval, the FDA may require a risk evaluation and mitigation strategy, or REMS, to help ensure that the benefits of the drug outweigh the potential risks.

REMS can include communication plans for healthcare professionals, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries.

The requirement for REMS can materially affect the potential market and profitability of the drug.

Moreover, the FDA may condition approval on substantial post-approval testing and surveillance to monitor the drug’s safety or efficacy.

Once granted, the FDA may withdraw drug approvals if the company fails to comply with regulatory standards or identifies problems following initial marketing.

Changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of a new NDA or NDA supplement before we can implement the change.

An NDA supplement for a new indication typically requires clinical data similar to that in the original application, and the FDA uses the same procedures and actions in reviewing NDA supplements as it does in reviewing new

As with new NDAs, the FDA often significantly extends the review process with requests for additional information or clarification.

Post-approval requirements

The FDA regulates drugs that are manufactured or distributed pursuant to FDA approvals and has specific requirements pertaining to recordkeeping, periodic reporting, drug sampling and distribution, advertising and promotion and reporting of adverse experiences with the drug.

After approval, the FDA must provide review and approval for most changes to the approved drug, such as adding new indications or other labeling claims.

There also are continuing, annual user fee requirements for any marketed drugs and the establishments who manufacture its drugs, as well as new application fees for supplemental applications with clinical data.

Drug manufacturers are subject to periodic unannounced inspections by the FDA and state agencies for compliance with cGMP requirements.

There are strict regulations regarding changes to the manufacturing process, and, depending on the significance of the change, it may require prior FDA approval before we can implement it.

FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon us and any third-party manufacturers that we may decide to use.

Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.

The FDA may withdraw approval if a company does not comply with regulatory requirements and maintain standards or if problems occur after the drug reaches the market.

If a company or the FDA discovers previously unknown problems with a drug, including adverse events of unanticipated severity or frequency, issues with manufacturing processes, or the company’s failure to comply with regulatory requirements, the FDA may revise the approved labeling to add new safety information;

impose post-marketing studies or other clinical studies to assess new safety risks;

or impose distribution or other restrictions under a REMS program.

Other potential consequences may include:

• restrictions on the marketing or manufacturing of the drug, complete withdrawal of the drug from the market or drug recalls;

• fines, warning letters or holds on post-approval clinical studies;

• the FDA refusing to approve pending NDAs or supplements to approved NDAs, or suspending or revoking of drug license approvals;

• drug seizure or detention, or refusal to permit the import or export of drugs;

• injunctions or the imposition of civil or criminal penalties.

The FDA strictly regulates marketing, labeling, advertising, and promotion of drugs that are placed on the market.

Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved label.

However, companies may share truthful and not misleading information that is otherwise consistent with the product’s FDA approved labeling.

The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses.

We could be subject to significant liability if we violated these laws and regulations.

Marketing Exclusivity

In addition to patent term (as extended by the Hatch-Waxman Act), the holder of the NDA for a listed drug may be entitled to a period of marketing exclusivity, during which the FDA cannot approve an abbreviated new drug application, or ANDA, or 505(b)(2) application that relies on the listed drug.

For example, a pharmaceutical manufacturer may obtain five years of non-patent exclusivity upon NDA approval of a new chemical entity, or NCE, which is a drug that contains an active moiety that has not been approved by FDA in any other NDA.

An "active moiety" is defined as the molecule or ion responsible for the drug substance's physiological or pharmacological action.

During the five year exclusivity period, the FDA cannot accept for filing any ANDA seeking approval of a generic version of that drug or any 505(b)(2) NDA for the same active moiety and that relies on the FDA's findings regarding that drug, except that FDA may accept an application for filing after four years if the follow-on applicant makes a paragraph IV certification.

A drug, including one approved under Section 505(b)(2), may obtain a three-year period of exclusivity for a particular condition of approval, or change to a marketed product, such as a new formulation for a previously approved product, if one or more new clinical studies (other than bioavailability or bioequivalence studies) was essential to the approval of the application and was conducted/sponsored by the applicant.

Should this occur, the FDA would be precluded from approving any ANDA or 505(b)(2)

application for the protected modification until after that three-year exclusivity period has run.

However, unlike NCE exclusivity, the FDA can accept an application and begin the review process during the exclusivity period.

Before approving an NDA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new product to determine whether they comply with cGMP requirements.

The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent

production of the product within required specifications.

The FDA also typically inspects clinical trial sites to ensure compliance with GCP requirements and the integrity of the data supporting safety and efficacy.

After the FDA evaluates an NDA and the manufacturing facilities, it issues either an approval letter or a complete response letter.

A complete response letter ("CRL"), generally outlines the deficiencies in the submission and may require substantial additional testing, or information, in order for the FDA to reconsider the application, such as additional clinical data, additional pivotal clinical trial(s), and/or other significant and time-consuming requirements related to clinical trials, preclinical studies or manufacturing.

If a CRL is issued, the applicant may resubmit an NDA addressing all of the deficiencies identified in the letter, withdraw the application, engage in formal dispute resolution or request an opportunity for a hearing.

The FDA has committed to reviewing resubmissions in two or six months depending on the type of information included.

Even if such data and information are submitted, the FDA may decide that an NDA does not satisfy the criteria for approval.

As a potential condition of an NDA approval, the FDA may require a REMS to help ensure that the benefits of the drug outweigh the potential risks to patients.

A REMS can include medication guides, communication plans for healthcare professionals and elements to assure a product’s safe use ("ETASU").

An ETASU can include, but is not limited to, special training or certification for prescribing or dispensing the product, dispensing the product only under certain circumstances, special monitoring and the use of patient-specific registries.

The requirement for a REMS can materially affect the potential market and profitability of the product.

Moreover, the FDA may require substantial post-approval testing and surveillance to monitor the product’s safety or efficacy.

Changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of an NDA supplement or, in some case, a new NDA, before the change can be implemented.

Orphan Drug Designation

The FDA may grant orphan drug designation to sponsors of drugs intended to treat a rare disease or condition that affects fewer than 200,000 individuals in the United States, or if it affects more than 200,000 individuals in the United States, there is no reasonable expectation that the cost of developing and making the drug for this type of disease or condition will be recovered from sales in the United States.

Orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical study costs, tax advantages, and user-fee waivers.

In addition, if a drug receives FDA approval for the indication for which it has orphan designation, the drug may be entitled to orphan drug exclusivity, which means the FDA may not approve any other application to market the same drug for the same indication for a period of seven years, except in limited circumstances, such as a showing of clinical superiority over the drug with orphan exclusivity.

Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in the United States but for which there is no reasonable expectation that the cost of developing and making the product for this type of disease or condition will be recovered from sales of the product in the United States.

Orphan drug designation must be requested before submitting an NDA.

After the FDA grants orphan drug designation, the identity of the drug and its potential orphan use are disclosed publicly by the FDA.

Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.

If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to a seven-year exclusive marketing period in the U.S.

for that product, for that indication.

During the seven-year exclusivity period, the FDA may not approve any other applications to market the same drug for the same disease, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity by means of greater effectiveness, greater safety, or providing a major contribution to patient care, or in instances of drug supply issues.

Orphan drug exclusivity does not prevent the FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition.

Other benefits of orphan drug designation include tax credits for certain research and an exemption from the NDA user fee.

Expedited Development and Review Programs

The FDA is authorized to designate certain products for expedited review if they are intended to address an unmet medical need in the treatment of a serious or life-threatening disease or condition.

Fast Track Designation

Fast track designation may be granted for products that are intended to treat a serious or life-threatening disease or condition for which there is no effective treatment and preclinical or clinical data demonstrate the potential to address unmet medical needs for the condition.

Fast track designation applies to both the product and the specific indication for which it is being studied.

The sponsor of an investigational drug product may request that the FDA designate the drug candidate for a specific indication as a fast track drug concurrent with, or after, the submission of the IND for the drug candidate.

The FDA must determine if the drug candidate qualifies for fast track designation within 60 days of receipt of the sponsor’s request.

For fast track products, sponsors

may have greater interactions with the FDA and the FDA may initiate review of sections of a fast track product’s NDA before the application is complete.

This rolling review is available if the FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a fast track product may be effective.

The sponsor must also provide, and the FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay applicable user fees.

At the time of an NDA filing, the FDA will determine whether to grant priority review designation.

Additionally, fast track designation may be withdrawn if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.

Breakthrough Therapy Designation

Breakthrough therapy designation may be granted for products that are intended, alone or in combination with one or more other products, to treat a serious or life-threatening condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over currently approved therapies on one or more clinically significant endpoints.

Under the breakthrough therapy program, the sponsor of a new drug candidate may request that the FDA designate the candidate for a specific indication as a breakthrough therapy concurrent with, or after, the submission of an IND for the drug candidate.

The FDA must determine if the drug product qualifies for breakthrough therapy designation within 60 days of receipt of the sponsor’s request.

The FDA may take certain actions with respect to breakthrough therapies, including holding meetings with the sponsor throughout the development process, providing timely advice to the product sponsor regarding development and approval, involving more senior staff in the review process, assigning a cross-disciplinary project lead for the review team and taking other steps to design the clinical studies in an efficient manner.

Priority Review

Priority review may be granted for products that are intended to treat a serious or life-threatening condition and, if approved, would provide a significant improvement in safety and effectiveness compared to available therapies.

The FDA will attempt to direct additional resources to the evaluation of an application designated for priority review in an effort to facilitate the review.

Accelerated Approval

Accelerated approval may be granted for products that are intended to treat a serious or life-threatening condition and that generally provide a meaningful therapeutic advantage to patients over existing treatments.

A product eligible for accelerated approval may be approved on the basis of either a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity or prevalence of the condition and the availability or lack of alternative treatments.

In clinical trials, a surrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes for a direct measurement of how a patient feels, functions or survives.

The accelerated approval pathway is most often used in settings in which the course of a disease is long, and an extended period of time is required to measure the intended clinical benefit of a product, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly.

Thus, accelerated approval has been used extensively in the development and approval of products for treatment of a variety of cancers in which the goal of therapy is generally to improve survival or decrease morbidity and the duration of the typical disease course requires lengthy and sometimes large studies to demonstrate a clinical or survival benefit.

The accelerated approval pathway is contingent on a sponsor’s agreement to conduct additional post-approval confirmatory studies to verify and describe the product’s clinical benefit.

These confirmatory trials must be completed with due diligence and, in some cases, the FDA may require that the trial be designed, initiated and/or fully enrolled prior to approval.

Failure to conduct required post-approval studies, or to confirm a clinical benefit during post-marketing studies, would allow the FDA to withdraw the product from the market on an expedited basis.

All promotional materials for product candidates approved under accelerated regulations are subject to prior review by the FDA.

Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or the time period for FDA review or approval may not be shortened.

Furthermore, fast track designation, breakthrough therapy designation, priority review and accelerated approval do not change the standards for approval, but may expedite the development or approval process.

Pediatric Information

Under the Pediatric Research Equity Act, or PREA, NDAs or supplements to NDAs must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective.

Under the Pediatric Research Equity Act ("PREA"), an NDA or supplements to an NDA must contain data to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective.

The FDA may grant full or partial waivers, or deferrals, for submission of data.

Unless otherwise required by regulation, PREA does not apply to any drug for an indication for which the FDA has granted an orphan designation.

Unless otherwise required by regulation, PREA does not apply to any drug for an indication for which orphan designation has been granted, with certain exceptions.

The Best Pharmaceuticals for Children Act ("BPCA"), provides NDA holders a six-month extension of any exclusivity—patent or nonpatent—for a drug if certain conditions are met.

Conditions for exclusivity include the FDA’s determination that information relating to the use of a new drug in the pediatric population may produce health benefits in that population, the FDA making a written request for pediatric studies, and the applicant agreeing to perform, and reporting on, the requested studies within the statutory timeframe.

Applications under the BPCA are treated as priority applications, with all of the benefits that designation confers.

Post-Approval Requirements

Once an NDA is approved, a product will be subject to certain post-approval requirements.

For instance, the FDA closely regulates the post-approval marketing and promotion of drugs, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet.

Drugs may be marketed only for the approved indications and in a manner consistent with the approved labeling.

Adverse event reporting and submission of periodic reports are required following FDA approval of an NDA.

The FDA also may require post-marketing testing, known as phase 4 testing, REMS, and surveillance to monitor the effects of an approved product, or the FDA may place conditions on an approval that could restrict the distribution or use of the product.

In addition, quality control, drug manufacture, packaging and labeling procedures must continue to conform to cGMP after approval.

Drug manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state agencies.

Registration with the FDA subjects entities to periodic unannounced inspections by the FDA, during which the Agency inspects manufacturing facilities to assess compliance with cGMP.

Accordingly, manufacturers must continue to expend time, money and effort in the areas of production and quality-control to maintain compliance with cGMP.

Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered.

Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market.

Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information, imposition of post-market studies or clinical studies to assess new safety risks or imposition of distribution or other restrictions under a REMS program.

Other potential consequences include, among other things:

• Restrictions on the marketing or manufacturing of the product, suspension of the approval, complete withdrawal of the product from the market or a product recall;

• Fines, warning or other enforcement-related letters or holds on post-approval clinical studies;

• Refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product license approvals;

• Product seizure or detention, or refusal to permit the import or export of products;

• Injunctions or the imposition of civil or criminal penalties.

The Hatch-Waxman Act Orange Book Listing

Under the Drug Price Competition and Patent Term Restoration Act of 1984, commonly referred to as the Hatch Waxman Amendments, NDA applicants are required to identify to the FDA each patent whose claims cover the applicant’s drug or approved method of using the drug.

Upon approval of a drug, the applicant must update its listing of patents to the NDA in timely fashion and each of the patents listed in the application for the drug is then published in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book.

Drugs listed in the Orange Book can, in turn, be cited by potential generic competitors in support of approval of an abbreviated new drug application ("ANDA").

An ANDA provides for marketing of a drug product that has the same active ingredient(s), strength, route of administration, and dosage form as the listed drug and has been shown through bioequivalence testing to be therapeutically equivalent to the listed drug.

An approved ANDA product is considered to be therapeutically equivalent to the listed drug.

Other than the requirement for bioequivalence testing, ANDA applicants are not required to conduct, or submit results of, pre-clinical or clinical tests to prove the safety or effectiveness of their drug product.

Drugs approved under the

ANDA pathway are commonly referred to as “generic equivalents” to the listed drug and can often be substituted by pharmacists under prescriptions written for the original listed drug pursuant to each state’s laws on drug substitution.

The ANDA applicant is required to certify to the FDA concerning any patents identified for the reference listed drug in the Orange Book.

Specifically, the applicant must certify to each patent in one of the following ways:

(i) the required patent information has not been filed;

(ii) the listed patent has expired;

(iii) the listed patent has not expired but will expire on a particular date and approval is sought after patent expiration;

or (iv) the listed patent is invalid or will not be infringed by the new product.

A certification that the new product will not infringe the already approved product’s listed patents, or that such patents are invalid, is called a Paragraph IV certification.

For patents listed that claim an approved method of use, under certain circumstances the ANDA applicant may also elect to submit a section viii statement certifying that its proposed ANDA label does not contain (or carves out) any language regarding the patented method-of-use rather than certify to a listed method-of-use patent.

If the applicant does not challenge the listed patents through a Paragraph IV certification, the ANDA application will not be approved until all the listed patents claiming the referenced product have expired.

If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA-holder and patentee(s) once the ANDA has been accepted for filing by the FDA (referred to as the “notice letter”).

The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice letter.

The filing of a patent infringement lawsuit within 45 days of the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months from the date the notice letter is received, expiration of the patent, the date of a settlement order or consent decree signed and entered by the court stating that the patent that is the subject of the certification is invalid or not infringed, or a decision in the patent case that is favorable to the ANDA applicant.

The ANDA application also will not be approved until any applicable non-patent exclusivity listed in the Orange Book for the referenced product has expired.

In some instances, an ANDA applicant may receive approval prior to expiration of certain non-patent exclusivity if the applicant seeks, and the FDA permits, the omission of such exclusivity-protected information from the ANDA prescribing information.

Upon an NDA approval of a new chemical entity ("NCE"), which is a drug that contains no active moiety that has been approved by the FDA in any other NDA, that drug receives five years of marketing exclusivity during which the FDA cannot receive any ANDA seeking approval of a generic version of that drug unless the application contains a Paragraph IV certification, in which case the application may be submitted one year prior to expiration of the NCE exclusivity.

If there is no listed patent in the Orange Book, there may not be a Paragraph IV certification, and, thus, no ANDA for a generic version of the drug may be filed before the expiration of the exclusivity period.

Certain changes to an approved drug, such as the approval of a new indication, the approval of a new strength, and the approval of a new condition of use, are associated with a three-year period of exclusivity from the date of approval during which the FDA cannot approve an ANDA for a generic drug that includes the change.

In some instances, an ANDA applicant may receive approval prior to expiration of the three-year exclusivity if the applicant seeks, and the FDA permits, the omission of such exclusivity-protected information from the ANDA package insert.

Patent Term Extension

The Hatch Waxman Amendments permit a patent term extension as compensation for patent term lost during the FDA regulatory review process.

Patent term extension, however, cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date.

After an NDA approval, owners of relevant drug patents may apply for the extension.

The allowable patent term extension is calculated as half of the drug’s testing phase (the time between an IND application and an NDA submission) and all of the review phase (the time between an NDA submission and approval) up to a maximum of five years.

The time can be reduced for any time the FDA determines that the applicant did not pursue approval with due diligence.

The United States Patent and Trademark Office ("USPTO"), in consultation with the FDA, reviews and approves the application for any patent term extension or restoration.

However, the USPTO may not grant an extension because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents or otherwise failing to satisfy applicable requirements.

Moreover, the applicable time period or the scope of patent protection afforded could be less than requested.

The total patent term after the extension may not exceed 14 years, and only one patent can be extended.

The application for the extension must be submitted prior to the expiration of the patent, and for patents that might expire during the application phase, the patent owner may request an interim patent extension.

An interim patent extension increases the patent term by one year and

may be renewed up to four times.

For each interim patent extension granted, the post-approval patent extension is reduced by one year.

The director of the USPTO must determine that approval of the drug covered by the patent for which a patent extension is being sought is likely.

Interim patent extensions are not available for a drug for which an NDA has not been submitted.

Coverage, Pricing, and Reimbursement

In the United States and in foreign markets, sales of pharmaceutical products depend, in part, on the extent to which third-party payors provide coverage and establish adequate reimbursement levels for such products.

In the United States, third-party payors include federal and state healthcare programs, private managed care providers, health insurers and other organizations.

Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid in the United States, and commercial payors are critical to new product acceptance.

There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved products.

In the United States, for example, principal decisions about reimbursement for new products are typically made by the Centers for Medicare & Medicaid Services, or CMS, an agency within the U.S.

Department of Health and Human Services (“HHS”).

CMS decides whether and to what extent a new product will be covered and reimbursed under Medicare, and private third-party payors often follow CMS’s decisions regarding coverage and reimbursement to a substantial degree.

In the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors.

Therefore, coverage and reimbursement for products can differ significantly from payor to payor.

Decisions regarding the extent of coverage and amount of reimbursement to be provided for each of our product candidates will be made on a plan-by-plan basis.

One payor’s determination to provide coverage for a product does not assure that other payors will also provide coverage, and adequate reimbursement, for the product.

Additionally, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our product candidates to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained.

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.

Further, such payors are increasingly challenging the price, examining the medical necessity and reviewing the cost effectiveness of medical product candidates.

There may be especially significant delays in obtaining coverage and reimbursement for newly approved drugs.

Third-party payors may limit coverage to specific product candidates on an approved list, known as a formulary, which might not include all FDA-approved drugs for a particular indication.

Outside the United States, the commercialization of therapeutics is generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost containment initiatives in Europe, Canada and other countries has, and will continue to, put pressure on the pricing and usage of therapeutics such as our product candidates.

Other Healthcare Laws

In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws have been applied to restrict certain general business and marketing practices in the pharmaceutical industry in recent years.

These laws include anti-kickback statutes, false claims statutes and other healthcare laws and regulations.

The federal Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or in return for, purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid, or other federally financed healthcare programs.

This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers, among others, on the other.

Although there are a number of statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions, the exceptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor.

In addition, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to commit a violation.

Federal civil and criminal false claims laws, including the federal civil False Claims Act, prohibit any person or entity from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to have a false claim paid.

This includes claims made to programs where the federal government reimburses, such as Medicare and Medicaid, as well as programs where the federal government is a direct purchaser, such as when it purchases off the Federal Supply Schedule.

Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in

turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product.

In addition, certain marketing practices, including off-label promotion, may also violate false claims laws.

Additionally, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

Most states also have statutes or regulations similar to the federal Anti-Kickback Statute and civil False Claims Act, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.

Other federal statutes pertaining to healthcare fraud and abuse include the civil monetary penalties statute, which prohibits, among other things, the offer or payment of remuneration to a Medicaid or Medicare beneficiary that the offerer or payor knows or should know is likely to influence the beneficiary to order a receive a reimbursable item or service from a particular supplier, and the additional federal criminal statutes created by the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), which prohibits, among other things, knowingly and willfully executing or attempting to execute a scheme to defraud any healthcare benefit program or obtain by means of false or fraudulent pretenses, representations or promises any money or property owned by or under the control of any healthcare benefit program in connection with the delivery of or payment for healthcare benefits, items or services.

Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to commit a violation.

Further, pursuant to the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation (the “Affordable Care Act” or the “ACA”), CMS has issued a final rule that requires manufacturers of prescription drugs to collect and report information on certain payments or transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other healthcare professionals (such as physicians assistants and nurse practitioners), and teaching hospitals, as well as investment interests held by physicians and their immediate family members.

The reports must be submitted on an annual basis.

The reported data is made available in searchable form on a public website on an annual basis.

Failure to submit required information may result in civil monetary penalties.

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, imposes obligations, including mandatory contractual terms, on covered entities, business associates and their covered subcontractors with respect to safeguarding the privacy, security and transmission of individually identifiable health information.

In addition, several states now require prescription drug companies to report certain expenses relating to the marketing and promotion of drug products and to report gifts and payments to individual healthcare practitioners in these states.

Other states prohibit various marketing-related activities, such as the provision of certain kinds of gifts or meals.

Still other states require the posting of information relating to clinical studies and their outcomes.

Some states require the reporting of certain drug pricing information, including information pertaining to and justifying price increases.

In addition, states such as California, Connecticut, Nevada and Massachusetts require pharmaceutical companies to implement compliance programs and/or marketing codes.

Several additional states are considering similar proposals.

Certain states and local jurisdictions also require the registration of pharmaceutical sales and medical representatives.

Compliance with these laws is difficult and time consuming, and companies that do not comply with these state laws face civil penalties.

Efforts to ensure that business arrangements with third parties comply with applicable healthcare laws and regulations involve substantial costs.

If a drug company’s operations are found to be in violation of any such requirements, it may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, the curtailment or restructuring of its operations, loss of eligibility to obtain approvals from the FDA, exclusion from participation in government contracting, healthcare reimbursement or other federal or state government healthcare programs, including Medicare and Medicaid, integrity oversight and reporting obligations, imprisonment, and reputational harm.

Although effective compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, these risks cannot be entirely eliminated.

Any action for an alleged or suspected violation can cause a drug company to incur significant legal expenses and divert management’s attention from the operation of the business, even if such action is successfully defended.

Healthcare Reform

In the United States and foreign jurisdictions, the legislative landscape continues to evolve.

There have been a number of legislative and regulatory changes to the healthcare system that could affect the future results of our operations.

In particular, there have been and continue to be a number of initiatives at the United States federal and state levels that seek to reform the way in which healthcare is funded and reduce healthcare costs.

In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively PPACA, was enacted, which included measures that have significantly changed health care financing by both governmental and private insurers.

The provisions of PPACA of importance to the pharmaceutical and biotechnology industry are, among others, the following:

• an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs agents, apportioned among these entities according to their market share in certain government healthcare programs;

• an increase in the rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the average manufacturer price for branded and generic drugs, respectively;

• a new Medicare Part D coverage gap discount program, in which manufacturers must now agree to offer 70% point-of-sale discounts to negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;

• extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations, unless the drug is subject to discounts under the 340B drug discount program;

• expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the Federal Poverty Level, thereby potentially increasing manufacturers’ Medicaid rebate liability;

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

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

• new requirements under the federal Physician Payments Sunshine Act for drug manufacturers to report information related to payments and other transfers of value made to physicians, as defined by such law, and

teaching hospitals as well as ownership or investment interests held by physicians and their immediate family members;

• new requirement to annually report certain drug samples that manufacturers and distributors provide to licensed practitioners, or to pharmacies of hospitals or other healthcare entities.

There have been executive, judicial and Congressional challenges to certain aspects of the PPACA.

While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the PPACA have been signed into law.

The Tax Cuts and Jobs Act of 2017, or Tax Act, included a provision that repealed, effective January 1, 2019, the tax based shared responsibility payment imposed by the PPACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” In addition, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the PPACA mandated “Cadillac” tax on high cost employer sponsored health coverage and medical device tax and, effective January 1, 2021, also eliminated the health insurer tax.

The Bipartisan Budget Act of 2018, or the BBA, among other things, amended the PPACA, effective January 1, 2019, to increase from 50% to 70% 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.” On December 14, 2018, a Texas U.S.

District Court Judge ruled that the PPACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Act.

Additionally, on December 18, 2019, the U.S.

Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the PPACA are invalid as well.

The United States Supreme Court is currently reviewing this case, but it is unknown when a decision will be reached.

Although the U.S.

Supreme Court has not yet ruled on the constitutionality of the PPACA, on January 28, 2021, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through May 15, 2021 for purposes of obtaining health insurance coverage through the PPACA marketplace.

The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the PPACA.

It is unclear how the Supreme Court ruling, other such litigation and the healthcare reform measures of the Biden administration will impact the PPACA.

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

In August 2011, the President signed into law the Budget Control Act of 2011, as amended, which, among other things, included aggregate reductions to Medicare payments to providers of 2% per fiscal year, which began in 2013 and, following passage of subsequent legislation, including the BBA, will continue through 2030 with the exception of a temporary suspension from May 1, 2020 through March 31, 2021 due to the COVID-19 pandemic, unless additional Congressional action is taken.

In January 2013, the American Taxpayer Relief Act of 2012 was enacted and, among other things, reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

Further, there has been increasing legislative and enforcement interest in the United States with respect to drug pricing practices.

Specifically, there have been several recent U.S.

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

At the federal level, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives.

For example, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that attempted to implement several of the administration’s proposals.

As a result, the FDA also released a final rule on September 24, 2020, effective November 30, 2020, implementing a portion of the importation executive order providing guidance for states to build and submit importation plans for drugs from Canada.

Further, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law.

The implementation of the rule has been delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation.

The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which have also been delayed pending review by the Biden administration until March 22, 2021.

On November 20, 2020, CMS issued an interim final rule implementing the Trump administration’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021.

On December 28, 2020, the United States District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule.

It is unclear whether the Biden administration will work to reverse these measures or pursue similar policy initiatives.

At the state level, legislatures have increasingly passed legislation and implemented 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.

It also possible that governmental action will be taken in response to the COVID-19 pandemic.

European Union-EMA process

In the European Union, our product candidates are also be subject to extensive regulatory requirements.

As in the United States, medicinal products can only be marketed if a marketing authorization, or MA, from the competent regulatory agencies has been obtained.

Similar to the United States, the various phases of preclinical and clinical research in the European Union are subject to significant regulatory controls.

Clinical trials of medicinal products in the European Union must be conducted in accordance with European Union and national regulations and the International Conference on Harmonization, or ICH, guidelines on Good Clinical Practices, or GCP.

Although the EU Clinical Trials Directive 2001/20/EC has sought to harmonize the European Union clinical trials regulatory framework, setting out common rules for the control and authorization of clinical trials in the European Union, the EU Member States have transposed and applied the provisions of the Directive differently.

This has led to significant variations in the Member State regimes.

To improve the current system, Regulation (EU) No 536/2014 on clinical trials on medicinal products for human use, which repealed Directive 2001/20/EC, was adopted on April 16, 2014 and published in the European Official Journal on May 27, 2014.

The Regulation aims to harmonize and streamline the clinical trials authorization process, simplify adverse event reporting procedures, improve the supervision of clinical trials, and increase their transparency.

Although the Regulation entered into force on June 16, 2014, it will not be applicable until six months after the full functionality of the IT portal and database envisaged in the Regulation is confirmed by an independent audit, and the European Commission publishes a notice of this confirmation.

This is not expected to occur until before 2021 as an audit of the system is intended to commence in December 2020.

Until then the Clinical Trials Directive 2001/20/EC will still apply.

In addition, the transitory provisions of the new Regulation offer the sponsors the possibility to choose between the requirements of the Directive and the Regulation for one year from the entry into application of the Regulation.

Under the current regime, before a clinical trial can be initiated it must be approved in each of the EU Member States where the trial is to be conducted by two distinct bodies:

the National Competent Authority, or NCA, and one or more Ethics Committees, or ECs.

Under the current regime all suspected unexpected serious adverse reactions, or SUSARs, to the investigated drug that occur during the clinical trial have to be reported to the NCA and ECs of the Member State where they occurred and would also be reported in all countries where the drug is being used in a clinical trial.

Approval Process

Under the centralized procedure, after the EMA issues an opinion, the European Commission issues a single marketing authorization valid across the European Union, as well as Iceland, Liechtenstein and Norway.

The centralized procedure is compulsory for human drugs that are:

derived from biotechnology processes, such as genetic engineering;

contain a new active substance indicated for the treatment of certain diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative disorders diseases or autoimmune diseases and other immune dysfunctions;

advanced-therapy medicines, such as gene-therapy, somatic cell-therapy or tissue-engineered medicines;

and officially designated orphan drugs.

For drugs that do not fall within these categories, an applicant has the option of submitting an application for a centralized marketing authorization to the EMA, as long as the drug concerned contains a new active substance;

is a significant therapeutic, scientific or technical innovation;

or if its authorization would be in the interest of public health.

There are also three other possible routes to authorize medicinal products in the European Union, which are available for products that fall outside the scope of the centralized procedure:

• National procedure.

National MAs, issued by the competent authorities of the Member States of the EEA, are available however these only cover their respective territory;

• Decentralized procedure.

Using the decentralized procedure, an applicant may apply for simultaneous authorization in more than one European Union country of a medicinal product that has not yet been authorized in any European Union country;

• Mutual recognition procedure.

In the mutual recognition procedure, a medicine is first authorized in one European Union Member State, in accordance with the national procedures of that country.

Thereafter, further marketing authorizations can be sought from other European Union countries in a procedure whereby the countries concerned agree to recognize the validity of the original, national marketing authorization.

Pursuant to Regulation (EC) No 1901/2006, all applications for marketing authorization for new medicines must include the results of all studies performed and details of all information collected in compliance with as described in a pediatric investigation plan, or PIP, agreed between regulatory authorities, the EMA’s Pediatric Committee, and the applicant, unless the medicine is exempt because of a deferral or waiver (e.g., because the relevant disease or condition occurs only in adults).

Applicants are encouraged to submit pediatric investigation plans early during product development, in time for studies to be conducted in the pediatric population, where appropriate, before marketing authorization applications are submitted.

Before the EMA is able to begin its assessment of a centralized procedure MA application, it will validate that the applicant has complied with an agreed pediatric investigation plan, or an application for a waiver has been submitted.

The applicant and the EMA may, where such a step is adequately justified, agree to modify a pediatric investigation plan to assist validation.

Modifications are not always possible;

may take longer to agree than the period of validation permits;

and may still require the applicant to withdraw its marketing authorization application, or MA, and to conduct additional non-clinical and clinical studies.

Products that are granted a MA on the basis of the pediatric clinical trials conducted in accordance with the PIP are eligible for a six month extension of the protection under a supplementary protection certificate or a patent qualifying for a supplementary protection (if any is in effect at the time of approval) or certificate or, in the case of orphan medicinal products, a two year extension of the orphan market exclusivity.

This pediatric reward is subject to specific conditions and is not automatically available when data in compliance with the PIP are developed and submitted.

Orphan drug designation

In the European Union, Regulation (EC) No 141/2000, as amended, states that a drug will be designated as an orphan drug if its sponsor can establish:

• that it is intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than five in ten thousand persons in the European Union when the application is made, or that it is intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition in the European Union and that without incentives it is unlikely that the marketing of the drug in the European Union would generate sufficient return to justify the necessary investment;

• that there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question that has been authorized in the European Union or, if such method exists, that the drug will be of significant benefit to those affected by that condition.

Regulation (EC) No 847/2000 sets out further provisions for implementation of the criteria for designation of a drug as an orphan drug.

An application for the designation of a drug as an orphan drug may be submitted at any stage of development of the drug before submission of a MA application.

However, an application for designation as an orphan drug may be submitted for a new therapeutic indication for an already authorized medicinal product.

If a centralized procedure MA in respect of an orphan drug is granted pursuant to Regulation (EC) No 726/2004, regulatory authorities will not, for a period of 10 years, accept another application for a MA, or grant a MA or accept an application to extend an existing MA, for the same therapeutic indication, in respect of a similar drug.

This period may however be reduced to six years if, at the end of the fifth year, it is established, in respect of the drug concerned, that the criteria for orphan drug designation are no longer met, for example, when it is shown on the basis of available evidence that the product is sufficiently profitable not to justify maintenance of market exclusivity.

The exclusivity period may increase to 12 years if, among other things, the MA includes the results of studies from an agreed pediatric investigation plan.

Notwithstanding the foregoing, a MA may be granted for the same therapeutic indication to a similar drug if:

• the holder of the MA for the original orphan drug has given its consent to the second applicant;

• the holder of the MA for the original orphan drug is unable to supply sufficient quantities of the drug;

• the second applicant can establish in the application that the second drug, although similar to the orphan drug already authorized, is safer, more effective or otherwise clinically superior.

Regulation (EC) No 847/2000 lays down definitions of the concepts ‘similar drug’ and ‘clinical superiority’.

Other incentives available to orphan drugs in the European Union include financial incentives such as a reduction of fees or fee waivers and protocol assistance.

Orphan drug designation does not shorten the duration of the regulatory review and approval process.

Good manufacturing practices

Like the FDA, the EMA, the competent authorities of the European Union Member States and other regulatory agencies regulate and inspect equipment, facilities and processes used in the manufacturing of drugs intended for the EU market to ensure that certain minimum standards are met.

These requirements apply, no matter where in the world the manufacturing process takes place and are designed to ensure that products intended for the EU market are of consistent high quality, are appropriate for their intended use and meet the requirements of the marketing authorization or clinical trial authorization.

If, after receiving clearance from regulatory agencies, a company makes a material change in manufacturing equipment, location, or process, additional regulatory review and approval may be required.

A company and its partners will be required to continue to comply with cGMP, and drug-specific regulations enforced by, the European Commission, the EMA and the competent authorities of European Union Member States following drug approval.

Also like the FDA, the EMA, the competent authorities of the European Union Member States and other regulatory agencies also conduct regular, periodic visits to reinspect equipment, facilities, and processes following the initial approval of a drug.

If, as a result of these inspections, the regulatory agencies determine that a company or its partners’ equipment, facilities, or processes do not comply with applicable regulations and conditions of drug approval, they may seek civil, criminal or administrative sanctions and/or remedies against us, including the suspension of its manufacturing operations or the withdrawal of our drug from the market.

Post-Approval Controls

The holder of a European MA must establish and maintain a pharmacovigilance system and appoint an individual qualified person for pharmacovigilance, or QPPV, who is responsible for oversight of that system.

Key obligations include expedited reporting of suspected serious adverse reactions and submission of periodic safety update reports, or PSURs.

All new MAs must include a risk management plan, or RMP, describing the risk management system that the company will put in place, recording the product’s safety profile and documenting the effectiveness of risk-minimization measures.

The regulatory authorities may also impose specific obligations as a condition of the MA.

Such risk-minimization measures or post-authorization obligations may include additional safety monitoring, more frequent submission of PSURs, or the conduct of additional clinical trials or post-authorization safety studies.

RMPs and PSURs are routinely available to third-parties requesting access, subject to limited redactions.

All advertising and promotional activities for the product must be consistent with the approved summary of product characteristics, and therefore all off-label promotion is prohibited.

Direct-to-consumer advertising of prescription medicines is also prohibited in the European Union.

Although general requirements for advertising and promotion of medicinal products are established under EU directives, the details are governed by regulations in each EU Member State and can differ from one country to another.

Data and market exclusivity

Similar to the United States, there is a process to authorize generic versions of innovative drugs in the European Union.

Generic competitors can, where data exclusivity has expired, submit abridged applications to authorize generic versions of drugs authorized by the EMA through the centralized procedure referencing the innovator’s data and demonstrating bioequivalence to the reference drug, among other things.

If a marketing authorization is granted for a medicinal product containing a new active substance, that product benefits from eight years of data exclusivity, during which generic marketing authorization applications referring to the data of that product may not be accepted by the regulatory authorities, and a further two years of market exclusivity, during which such generic products may not be placed on the market.

The two-year period may be extended to three years if during the first eight years a new therapeutic indication with significant clinical benefit over existing therapies is approved.

This system is usually referred to as “8+2”.

There is also a special regime for biosimilars, or biological medicinal products that are similar to a reference medicinal product but that do not meet the definition of a generic medicinal product, for example, because of differences in raw materials or manufacturing processes.

For such products, the results of appropriate preclinical or clinical trials must be provided, and guidelines from the EMA detail the type of quantity of supplementary data to be provided for different types of biological product.

In addition, there are certain circumstances, such as where the innovator company is granted a marketing authorization for a significant new indication for the relevant medicinal product, where an additional one year of marketing exclusivity may be granted.

As referenced above, orphan medicinal products are subject to separate marketing exclusivity arrangements.

Other international markets-drug approval process

In some international markets (such as China or Japan), although data generated in United States or European Union trials may be submitted in support of a marketing authorization application, regulators may require additional clinical studies conducted in the host territory, or studying people of the ethnicity of the host territory, prior to the filing or approval of marketing applications within the country.

Pricing and reimbursement

Significant uncertainty exists as to the coverage and reimbursement status of any drugs for which companies may obtain regulatory approval.

In the United States and markets in other countries, sales of any drugs for which companies receive regulatory approval for commercial sale will depend in part on the availability of coverage and reimbursement from third-party payors.

Third-party payors include government authorities, managed care plans, private health insurers and other organizations.

The process for determining whether a third-party payor will provide coverage for a drug may be separate from the process for setting the reimbursement rate that the payor will pay for the drug.

Third-party payors may limit coverage to specific drugs on an approved list, or formulary, which might not include all of the FDA-approved drugs for a particular indication.

Moreover, a third-party payor’s decision to provide coverage for a drug does not imply that an adequate reimbursement rate will be approved.

Additionally, coverage and reimbursement for drugs can differ significantly from payor to payor.

One third-party payor’s decision to cover a particular drug does not ensure that other payors will also provide coverage for the drug, or will provide coverage at an adequate reimbursement rate.

Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on its investment in drug development.

Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of drugs and services, in addition to their safety and efficacy.

To obtain coverage and reimbursement for any drug that might be approved for sale, we may need to conduct expensive pharmacoeconomic studies to demonstrate the medical necessity and cost-effectiveness of our drug.

These studies will be in addition to the studies required to obtain regulatory approvals.

If third-party payors do not consider a drug to be cost-effective compared to other available therapies, they may not cover the drug after approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow a company to sell its drugs at a profit.

government, state legislatures and foreign governments have shown significant interest in implementing cost containment programs to limit the growth of government-paid health care costs, including price controls, restrictions on reimbursement and requirements for substitution of generic drugs for branded prescription drugs.

By way of example, PPACA contains provisions that may reduce the profitability of drugs, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatory discounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies’ share of sales to federal health care programs.

Adoption of government controls and measures, and tightening of restrictive policies in jurisdictions with existing controls and measures, could limit payments for our drugs.

In the European Community, governments influence the price of drugs through their pricing and reimbursement rules and control of national health care systems that fund a large part of the cost of those drugs to consumers.

Some jurisdictions operate positive and negative list systems under which drugs may only be marketed once a reimbursement price has been agreed to by the government.

To obtain reimbursement or pricing approval, some of these countries may require the completion of clinical studies that compare the cost effectiveness of a particular drug candidate to currently available therapies.

Other member states allow companies to fix their own prices for medicines, but monitor and control company profits.

The downward pressure on health care costs in general, particularly prescription drugs, has become very intense.

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

In addition, in some countries, cross border imports from low-priced markets exert a commercial pressure on pricing within a country.

The marketability of any drugs for which companies receive regulatory approval for commercial sale may suffer if government and other third-party payors fail to provide coverage and adequate reimbursement.

In addition, the focus on cost containment measures in the United States and other countries has increased and we expect will continue to increase the pressure on pharmaceutical pricing.

Coverage policies and third-party reimbursement rates may change at any time.

Other healthcare laws impacting sales, marketing, and other company activities

Numerous regulatory authorities in addition to the FDA, including, in the United States, CMS, other divisions of the U.S.

Department of Health and Human Services, or HHS, the U.S.

Department of Justice, and similar foreign, state, and local government authorities, regulate and enforce laws and regulations applicable to sales, promotion and other activities of pharmaceutical manufacturers.

These laws and regulations may impact, among other things, our clinical research programs, proposed sales and marketing and education activities, and financial and business relationships with future prescribers of our product candidates, once approved.

These laws and regulations include U.S.

federal, U.S.

state and foreign anti-kickback, false claims, and data privacy and security laws, which are described below, among other legal requirements that may affect our current and future operations.

The FDA regulates all advertising and promotion activities for drugs under its jurisdiction both prior to and after approval.

Only those claims relating to safety and efficacy that the FDA has approved may be used in labeling once the drug is approved.

Physicians may prescribe legally available drugs for uses that are not described in the drug’s labeling and that differ from those we tested and the FDA approved.

Such off-label uses are common across medical specialties, and often reflect a physician’s belief that the off-label use is the best treatment for the patients.

The FDA does not regulate the behavior of physicians in their choice of treatments, but FDA regulations do impose stringent restrictions on manufacturers’ communications regarding off-label uses.

If we do not comply with applicable FDA requirements we may face adverse publicity, enforcement action by the FDA, corrective advertising, consent decrees and the full range of civil and criminal penalties available to the FDA.

Promotion of off-label uses of drugs can also implicate the false claims laws described below.

Anti-kickback laws including, without limitation, the federal Anti-Kickback Statute that applies to items and services reimbursable under governmental healthcare programs such as Medicare and Medicaid, make it illegal for a person or entity to, among other things, knowingly and willfully solicit, receive, offer or pay remuneration, directly or indirectly, to induce, or in return for, purchasing, leasing, ordering, or arranging for or recommending the purchase, lease, or order of any good, facility, item, or service reimbursable, in whole or in part, under a federal healthcare program.

Due to the breadth of the statutory provisions and the narrowness of the statutory exceptions and regulatory safe harbors available, it is possible that our practices might be challenged under anti-kickback or similar laws.

Moreover, recent healthcare reform legislation has strengthened these laws.

For example, PPACA among other things, amends the intent requirement of the federal Anti-Kickback Statute and certain other criminal healthcare fraud statutes to clarify that a person or entity does not need to have actual knowledge of these statutes or specific intent to violate them in order to have committed a crime.

In addition, PPACA clarifies that the government may assert that a claim that includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act.

False claims laws, including, without limitation, the federal civil False Claims Act, and civil monetary penalty laws prohibit, among other things, anyone from knowingly and willingly presenting, or causing to be presented for payment, to the federal government (including Medicare and Medicaid) claims for reimbursement for, among other things, drugs or services that are false or fraudulent, claims for items or services not provided as claimed, or claims for medically unnecessary items or services.

Our activities relating to the sales and marketing of its drugs may be subject to scrutiny under these laws, as well as civil monetary penalties laws and the criminal healthcare fraud provisions enacted as part of the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA.

HIPAA imposes criminal and civil liability for, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement, in connection with the delivery of, or payment for, healthcare benefits, items or services.

Similar to the U.S.

federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations governs the conduct of certain electronic healthcare transactions and imposes requirements with respect to safeguarding the security and privacy of protected health information on HIPAA covered entities and their business associates who provide services involving HIPAA protected health information to such covered entities.

The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services, or CMS, information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), and teaching hospitals, and applicable manufacturers and applicable group purchasing organizations to report annually to CMS ownership and investment interests held by physicians and their immediate family members.

Beginning in 2022, applicable manufacturers also will be required to report such information regarding payments and other transfers of value to physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified registered nurse anesthetists and certified nurse midwives provided during the previous year.

In addition, companies may be subject to state law equivalents of each of the above federal laws, such as anti-kickback, self-referral, and false claims laws which may apply to our business practices, including but not limited to, research, distribution, sales and marketing arrangements and submitting claims involving healthcare items or services reimbursed by any third-party payor, including commercial insurers;

state laws that require pharmaceutical manufacturers to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government that otherwise restricts payments that may be made to healthcare providers;

state laws that require pharmaceutical manufacturers to file reports with states regarding marketing information, such as the tracking and reporting of gifts, compensation and other remuneration

and items of value provided to healthcare professionals and entities;

state laws that require the reporting of information related to drug pricing;

state and local laws requiring the registration of pharmaceutical sales representatives;

and state laws governing the privacy and security of personal data and protected health information in certain circumstances, many of which differ from each other in significant ways, thus complicating compliance efforts.

Violations of these laws may result in significant criminal, civil and administrative sanctions, including fines and civil monetary penalties, the possibility of exclusion from federal healthcare programs (including Medicare and Medicaid), disgorgement, contractual damages, reputational harm and the imposition of corporate integrity agreements or other similar agreements with governmental entities, which may impose, among other things, rigorous operational and monitoring requirements on companies.

Similar sanctions and penalties, as well as imprisonment, also can be imposed upon executive officers and employees, including criminal sanctions against executive officers under the so-called “responsible corporate officer” doctrine, even in situations where the executive officer did not intend to violate the law and was unaware of any wrongdoing.

Given the significant penalties and fines that can be imposed on companies and individuals if convicted, allegations of such violations often result in settlements even if the company or individual being investigated admits no wrongdoing.

Settlements often include significant civil sanctions and additional corporate integrity obligations.

Similar rigorous restrictions are imposed on the promotion and marketing of drugs in the European Union and other countries.

As of Mar ch 15, 2021, we had 13 employees, 12 of whom were full-time employees and one of whom was a part-time employee.

As of March 15, 2021, one of our employees was engaged in research and development activities and 12 of our employees were engaged in business development, finance, information systems, facilities, human resources or administrative support.

As of March 15, 2021, we had 12 employees located in the United States and one employee located in France.

None of our U.S.

employees are represented by any collective bargaining agreements.

Our French employee is represented by a collective bargaining agreement.

In connection with the Plan, our Board determined to reduce our workforce by up to 85%, with the majority of the reduction in personnel expected to be completed by April 15, 2021.

OvaScience Merger

On December 7, 2018, OvaScience, Inc., or OvaScience, now known as Millendo Therapeutics, Inc., completed its reverse merger or, the OvaScience Merger, with what was then known as “Millendo Therapeutics, Inc.,” or Private Millendo, in accordance with the terms of the Agreement and Plan of Merger and Reorganization dated as of August 8, 2018, as amended on September 25, 2018 and November 1, 2018.

OvaScience’s shares of common stock listed on The Nasdaq Capital Market, previously trading through the close of business on Friday, December 7, 2018 under the ticker symbol “OVAS,” commenced trading on The Nasdaq Capital Market, under the ticker symbol “MLND,” on Monday, December 10, 2018.

Immediately following the OvaScience Merger, Private Millendo became a wholly-owned subsidiary of OvaScience.

Upon consummation of the OvaScience Merger, OvaScience adopted the business plan of Private Millendo and discontinued the pursuit of OvaScience’s business plan pre-Closing.

In the United States there have been, and continue to be, proposals by the federal government, state governments, regulators and third-party payors to control or manage the increased costs of health care and, more generally, to reform the U.S.

healthcare system.

The pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

For example, in March 2010, the ACA was enacted, which intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry

and impose additional health policy reforms, substantially changed the way healthcare is financed by both governmental and private insurers, and significantly impacts the U.S.

pharmaceutical industry.

The ACA, among other things, (i) subjected therapeutic biologics to potential competition by lower-cost biosimilars by creating a licensure framework for follow-on biologic products, (ii) proscribed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs and therapeutic biologics that are inhaled, infused, instilled, implanted or injected, (iii) increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, (iv) established annual nondeductible fees and taxes on manufacturers of certain branded prescription drugs and therapeutic biologics, apportioned among these entities according to their market share in certain government healthcare programs, (v) established a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (now 70%) point of-sale discounts off negotiated prices of applicable brand drugs and therapeutic biologics to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs and therapeutic biologics to be covered under Medicare Part D, (vi) expanded eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for individuals with income at or below 133% of the federal poverty level, thereby potentially increasing manufacturers’ Medicaid rebate liability, (vii) expanded the entities eligible for discounts under the Public Health program, (viii) created a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research, and (ix) established a Center for Medicare Innovation at CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.

There have been judicial, executive brand, and Congressional challenges to certain aspects of the ACA, to repeal or replace certain aspects, of the ACA.

By way of example, the Tax Cuts and Jobs Act of 2017 (the "Tax Act"), was enacted and included, among other things, a provision that repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” There have been subsequent challenges to the constitutionality of the ACA following the repeal of the individual mandate.

On June 17, 2021, the U.S.

Supreme Court dismissed a challenge on procedural grounds that argued the ACA is unconstitutional in its entirety because the individual mandate was repealed by Congress.

Thus, the ACA will remain in effect in its current form.

However, it is possible that the ACA will be subject to judicial or Congressional challenges in the future.

It is unclear how such challenges will impact the ACA.

Tempest cannot predict the ultimate content, timing or effect of any healthcare reform legislation or the impact of potential legislation on its business.

In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted to reduce healthcare expenditures.

On August 2, 2011, the Budget Control Act of 2011, was enacted which, among other things, included aggregate reductions of Medicare payments to providers of 2% per fiscal year.

These reductions went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute will remain in effect through 2031, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022, unless additional Congressional action is taken.

Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 3% in the final fiscal year of this sequester.

Moreover, on January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

If federal spending is further reduced, anticipated budgetary shortfalls may also impact the ability of relevant agencies, such as the FDA or the National Institutes of Health to continue to function at current levels.

Amounts allocated to federal grants and contracts may be reduced or eliminated.

These reductions may also impact the ability of relevant agencies to timely review and approve research and development, manufacturing, and marketing activities, which may delay Tempest’s ability to develop, market and sell any products Tempest may develop.

Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives.

For example, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (“MMA”), changed the way Medicare covers and pays for pharmaceutical products.

The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for physician-administered drugs.

In addition, this legislation provided authority for limiting the number of drugs that will be covered in any therapeutic class.

While the MMA only applies to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates.

Therefore, any reduction in reimbursement that results from the MMA may result in a similar reduction in payments from private payors.

Recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed

to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products.

At the federal level, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs.

In response to Biden’s executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles.

No legislation or administrative actions have been finalized to implement these principles.

At the state level, legislatures are increasingly 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.

Additionally, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017 was signed into law.

The law, among other things, provides a federal framework for certain patients to access certain investigational new drug products that have completed a phase 1 clinical trial and that are undergoing investigation for FDA approval.

Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA authorization under an FDA expanded access program;

however, manufacturers are not obligated to provide investigational new drug products under the current federal right to try law.

Our corporate headquarters are located at 7000 Shoreline Court, Suite 275, South San Francisco, California 94080 where we occupy approximately 9,780 square feet of research and development laboratory and related office space under a lease that ends in February 2024.

In addition, in January 2022 we entered into an agreement to lease approximately an additional 20,116 square feet of laboratory and office space at 2000 Sierra Point Parkway, Brisbane, California 94005, which we anticipate occupying beginning in November 2022.

We believe that our existing facilities meet our current needs.

We may need additional office space in the future as we continue to build our development, commercial and support teams.

We believe that we can find suitable additional space in the future on commercially reasonable terms.

Employees and Human Capital Resources

As of December 31, 2021, we had 17 employees, including ten holding Ph.D., M.D., JD, LL.M., and/or MBA degrees, our employees have established internal expertise in chemistry, biochemistry, molecular biology, immunology, pharmacology, toxicology, pre-clinical development, regulatory and quality, translational medicine, and early-to-late-stage clinical development, as well as finance, business development and strategic transactions.

None of our employees are represented by a labor union or covered by collective bargaining agreements.

We will continue to add experienced and talented scientists in areas, such as medicinal chemistry, that we believe are critical for the discovery of highly differentiated small-molecule compounds.

Compensation and Benefits

We consider a number of measures and objectives in managing our human capital assets, including, among others, employee engagement, development and training, talent acquisition and retention, employee safety and wellness, diversity and inclusion, and compensation and pay equity.

We provide our employees with salaries and bonuses intended to be competitive for our industry, opportunities for equity ownership, development programs that enable continued learning and growth and a benefits package to promote well-being across all aspects of their lives, including health care, retirement planning and paid time off.

The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees, consultants and directors through the granting of equity-based compensation awards and cash-based compensation awards, in order to increase stockholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives.

Diversity, Equity and Inclusion (DEI)

We believe that a diverse workforce is important to our success and we are fundamentally committed to creating and maintaining a work environment in which employees are treated fairly, with dignity, decency, respect and in accordance with all applicable laws.

We understand that varied perspectives lead to the best ideas and outcomes.

We believe that by creating a workplace where every individual can feel welcome and valued, we will be better able to achieve our corporate objectives.

All employees must adhere to a code of business conduct and ethics and our employee handbook, which combined, define standards for appropriate behavior.

Our recruitment, hiring, development, training, compensation, and advancement is based on qualifications, performance, skills, and experience without regard to gender, gender identity, sexual orientation, race, or

P eople of color and those who are part of underrepresented groups in the biotech industry are encouraged to apply for open positions.

Available Information

Our internet website address is www.millendo.com.

Our internet website address is www.Tempesttx.com.

In addition to the information about us and our subsidiaries contained in this Annual Report, information about us can be found on our website.

Our website and information included in or linked to our website are not part of this Annual Report.

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge through our website as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission, or SEC.

Additionally, the SEC maintains an internet site that contains reports, proxy and information statements and other information.

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Item 1. Business