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Item 1A. Risk Factors

2021-05-13 compared with 2020-11-12 · 238 added, 251 removed, 1041 unchanged (32% of the section changed)

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In addition, this pandemic has caused substantial disruption in the financial markets and economies worldwide, which could result in adverse effects on our business and operations.

Significant outbreaks of contagious diseases, and other adverse public health developments, could have a material impact on our business operations and operating results.

In December 2019, an outbreak of respiratory illness caused by a strain of novel coronavirus, COVID-19, began in China.

That outbreak has led to millions of confirmed cases worldwide, including in the United States and other countries where we are conducting clinical trials or activities in support thereof.

The World Health Organization declared the outbreak a global public health emergency on January 30, 2020 and declared it a pandemic on March 11, 2020.

In addition to those who have been directly affected, billions more have been affected by governmental efforts around the world to slow the spread of the outbreak.

The outbreak and government measures taken in response thereto have also had a significant impact, both direct and indirect, on segments of the global economy and have interrupted our clinical trial activities, disrupted our business operations and have the potential to interrupt our supply chain.

We have experienced restrictions and delays at our existing clinical sites and delays in activating new clinical sites.

For example, in our ongoing Phase 2b/3 trial of Haduvio for t he treatment of pruritus associated with prurigo nodularis, which we refer to as our PRISM trial , new patient screening and most enrollment was temporarily halted due to the COVID-19 pandemic.

After resuming screening and enrollment, multiple sites in the PRISM trial have begun requiring remote monitoring of patient data and we could be required to amend the protocol for the trial to have fewer patient visits over the course of the trial.

In addition, the clinical sites in our ongoing Phase 2 trial for chronic cough in patients with idiopathic pulmonary fibrosis, or IPF, temporarily suspended enrollment and treatment of patients in the trial due to the vulnerability of IPF patients to COVID-19 and we recently amended the protocol for the trial to reduce the number of in-person patient visits and procedures.

While patient screening and enrollment for our Phase 2 clinical trial for chronic cough in patients with IPF resumed at certain clinical trial sites in the fourth quarter of 2020, some sites may take longer to resume screening and enrollment due to increased COVID-19 infection rates in the areas where they are located, and we expect other sites may cease to participate in the trial entirely.

Significant outbreaks of contagious diseases, such as the COVID-19 pandemic, and other adverse public health developments, could have a material impact on our business operations and operating results.

The COVID-19 pandemic and government measures taken in response thereto have also had a significant impact, both direct and indirect, on segments of the global economy and have interrupted our clinical trial activities, disrupted our business operations and have the potential to interrupt our supply chain .

We have experienced restrictions and delays at our existing clinical sites.

For example, in our ongoing Phase 2b/3 trial of Haduvio for the treatment of pruritus associated with prurigo nodularis, which we refer to as our Phase 2b/3 PRISM trial, new patient screening and most enrollment was temporarily halted in March 2020 due to the COVID-19 pandemic.

After resuming screening and enrollment, multiple sites in the Phase 2b/3 PRISM trial have begun requiring remote monitoring of patient data.

We also experienced slower recruitment activities in the Phase 2b/3 PRISM trial worldwide through the latter part of 2020 and the beginning of 2021 due to the resurgence of the COVID-19 pandemic.

In addition, the clinical sites in our ongoing Phase 2 trial for chronic cough in patients with idiopathic pulmonary fibrosis, or IPF, which we refer to as the Phase 2 CANAL trial, suspended enrollment and treatment of patients in the trial due to the vulnerability of IPF patients to COVID-19 and as a result, we amended the protocol for the trial to reduce the number of in-person patient visits and procedures.

While patient screening and enrollment for our Phase 2 CANAL trial resumed at certain clinical trial sites in the fourth quarter of 2020, all sites in the trial paused screening again in December 2020 in response to a shelter in place directive from the U.K.

This directive expired in March 2021 and we expect the other COVID-19 related restrictions will continue to be lifted through June 2021, assuming the pandemic does not worsen in the United Kingdom.

Initial screening activity has resumed at certain sites following the lifting of the shelter in place directive.

However, we expect that some sites may take longer to resume their trial activity due to increased COVID-19 infection rates in the areas where they are located and that other sites may cease to participate in the trial entirely.

We have decided not to pursue opening new clinical sites in Germany due to the estimated timing and cost to add these additional sites.

Instead, in light of the easing of pandemic restrictions in the United Kingdom, we are focusing our efforts on the completion of enrollment in the Phase 2 CANAL trial in the United Kingdom.

The COVID-19 pandemic may also adversely affect our ability to recruit and retain principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19, and may result in further disruptions to our clinical trials due to prioritization of hospital and medical resources toward the outbreak, restrictions on travel of patients and healthcare providers, potential unwillingness of patients to enroll in trials at this time, or the inability of patients to comply with clinical trial protocols if quarantines or travel restrictions impede patient movement or interrupt healthcare services.

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

Our net losses were $23.2 million, $26.1 million and $20.5 million for the nine months ended September 30, 2020 and the years ended December 31, 2019 and 2018, respectively.

As of September 30, 2020, we had an accumulated deficit of $137.5 million.

Our net losses were $8.4 million and $32.8 million for the three months ended March 31, 2021 and for the year ended December 31, 2020, respectively.

As of March 31, 2021, we had an accumulated deficit of $155.3 million.

We have not generated any revenues from product sales, have not completed the development of any product candidate and may never have a product candidate approved for commercialization.

We have financed our operations to date primarily through private placements of our convertible preferred stock and convertible notes prior to our initial public offering, borrowings under our prior term loan facility, our initial public offering and concurrent private placement completed in May 2019, sales of our common stock pursuant to the ATM Sales Agreement we entered into in June 2020, which we refer to as the ATM Sales Agreement, and the term loan facility with Silicon Valley Bank that we entered into in August 2020, which we refer to as the SVB Term Loan.

We have financed our operations to date primarily through private placements of our convertible preferred stock and convertible notes prior to our initial public offering, borrowings under our prior term loan facility, proceeds from our initial public offering and concurrent private placement completed in May 2019, sales of our common stock pursuant to the ATM Sales Agreement we entered into in June 2020, which we refer to as the ATM Sales Agreement, and the term loan facility with Silicon Valley Bank that we entered into in August 2020, which we refer to as the SVB Term Loan.

We have devoted substantially all of our financial resources and efforts to the clinical development of our product candidate Haduvio and related activities.

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We anticipate that our expenses will increase substantially if and as we:

continue to develop and conduct clinical trials of Haduvio, including our ongoing Phase 2b/3 trial of Haduvio for the treatment of pruritus associated with prurigo nodularis, which we refer to as our PRISM trial, and our other ongoing clinical trials of Haduvio in other serious neurologically mediated conditions, including our Phase 2 trial for chronic cough in patients with IPF;

significantly increase the number of patients in the PRISM trial to a total of 360 patients based on the sample size re-estimation, or SSRE, analysis;

continue to develop and conduct clinical trials of Haduvio, including our ongoing Phase 2b/3 PRISM trial and our ongoing Phase 2 CANAL trial;

significantly increase the number of subjects in the Phase 2b/3 PRISM trial to a total of 360 patients based on the sample size re-estimation, or SSRE, analysis;

complete other development work required for the filing of a new drug application, or NDA, with the U.S.

Food and Drug Administration, or FDA, and the filing of a marketing authorization application, or MAA, with the European Medicines Agency, or EMA, for Haduvio for the treatment of pruritus associated with prurigo nodularis, including completing our PRISM trial and at least one additional Phase 3 clinical trial in this indication;

Food and Drug Administration, or FDA, and the filing of a marketing authorization application, or MAA, with the European Medicines Agency, or EMA, for Haduvio for the treatment of pruritus associated with prurigo nodularis, including completing our Phase 2b/3 PRISM trial and at least one additional Phase 3 clinical trial in this indication;

seek regulatory and marketing approvals for Haduvio for the treatment of pruritus associated with prurigo nodularis or for other serious neurologically mediated conditions or for any future product candidate that successfully completes clinical trials, if any;

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In addition, we may incur additional expenses as a result of the COVID-19 pandemic and resulting clinical trial delays and interruptions.

Our ability to become and remain profitable depends on our ability to g enerate revenue.

Our ability to become and remain profitable depends on our ability to generate revenue.

We do not expect to generate significant revenue unless and until we are able to obtain marketing approval for, and successfully commercialize, Haduvio or any future product candidate.

Successful commercialization will require achievement of key milestones, including completing clinical trials of Haduvio or any future product candidate, obtaining marketing approval for these product candidates, manufacturing, marketing and selling those products for which we may obtain marketing approval, s atisfying any post-marketing requirements and obtaining reimbursement for any such product from private insurance or government payors.

For example, in order to successfully commercialize Haduvio for the treatment of pruritus associated with prurigo nodula ris, we will be required, at a minimum, to successfully complete our ongoing PRISM trial as well as an additional Phase 3 clinical trial prior to submitting an NDA and MAA to regulatory authorities to obtain marketing approval.

Successful commercialization will require achievement of key milestones, including completing clinical trials of Haduvio or any future product candidate, obtaining marketing approval for these product candidates, manufacturing, marketing and selling those products for which we may obtain marketing approval, satisfying any post-marketing requirements and obtaining reimbursement for any such product from private insurance or government payors.

For example, in order to successfully commercialize Haduvio for the treatment of pruritus associated with prurigo nodularis, we will be required, at a minimum, to successfully complete our ongoing Phase 2b/3 PRISM trial as well as an additional Phase 3 clinical trial prior to submitting an NDA and MAA to regulatory authorities to obtain marketing approval.

Because of the uncertainties and risks associated with these activities, we are unable to accurately predict the timing and amount of revenues, and if or when we might achieve profitability.

We may never succeed in these activities and, even if we do, we may never generate revenues t hat are large enough for us to achieve profitability.

We may never succeed in these activities and, even if we do, we may never generate revenues that are large enough for us to achieve profitability.

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

Our failure to become and remain profitable would decrease the value of our c ompany and could impair our ability to raise capital, expand our business, maintain our development efforts, develop a pipeline of product candidates or continue our operations.

Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, expand our business, maintain our development efforts, develop a pipeline of product candidates or continue our operations.

We have a limited operating history and no products approved for commercial sale, which may make it difficult to evaluate the prospects for our future success and viability.

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Accordingly, you should not rely upon the results of any quarterly or annual periods as indications of future operating performance.

We have identified conditions and events that raise substantial doubt about our ability to continue as a going concern.

We believe there is substantial doubt about our ability to continue as a going concern as of the date of this Quarterly Report on Form 10-Q without additional capital.

See Note 1 to our financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for additional information on our assessment.

We plan to address this condition through the sale of common stock in public offerings and/or private placements, debt financings or other capital sources, including collaborations with other companies or other strategic transactions.

If we are unable to obtain such funding and continue as a going concern, we might have to liquidate our assets and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.

Our lack of cash resources and our conclusion that we may be unable to continue as a going concern may materially adversely affect our share price and our ability to raise new capital or to enter into critical contractual relationships with third parties.

We will need substantial additional funding, and if we are unable to raise sufficient capital when needed on acceptable terms, or at all, we could be forced to delay, reduce or abandon our product development programs or commercialization efforts.

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We have consumed substantial amounts of cash since our inception.

For example, in the nine months ended September 30, 2020 and in the years ended December 31, 2019 and 2018, we used net cash of $20.1 million, $23.1 million and $18.3 million, respectively, in our operating activities, substantially all of which related to development activities for Haduvio.

As of September 30, 2020, our cash and cash equivalents were $53.3 million .

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we continue to develop and conduct clinical trials of Haduvio, including our ongoing PRISM trial and the additional Phase 3 clinical trial we will need to conduct for Haduvio for the treatment of pruritus associated with prurigo nodularis and our other ongoing clinical trials, acquire or in-license rights to other potential product candidates or technologies and seek regulatory and marketing approvals for Haduvio or any future product candidate that successfully completes clinical trials, if any.

For example, in the three months ended March 31, 2021 and the year ended December 31, 2020, we used net cash of $7.6 million and $29.0 million, respectively, in our operating activities, substantially all of which related to development activities for Haduvio.

As of March 31, 2021, our cash and cash equivalents were $41.6 million.

treatment of pruritus associated with prurigo nodularis and our other ongoing clinical trials, acquire or in-license rights to other potential product candidates or technologies and seek regulatory and marketing approvals for Haduvio or any future product candidate that successfully completes clinical trials, if any.

In addition, we may incur additional expenses as a result of the COVID-19 pandemic and resulting clinical trial delays and interruptions.

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For instance, we currently intend to commercialize Haduvio in the United States ourselves by developing a focused, specialty sales, marketing and distribution organization.

Furthermore, we expect to incur significant additional costs associated with operating as a public company.

Furthermore, we expect to incur significant costs associated with operating as a public company.

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

If we are unable to raise sufficient capital when needed on acceptable terms, or at all, we may be forced to delay, reduce or abandon our development programs or any future commercialization efforts.

We plan to use our existing cash and cash equivalents to fund the development of Haduvio for the treatment of pruritus associated with prurigo nodularis and the treatment of chronic cough in patients with IPF, to fund the developme nt of Haduvio for other serious neurologically mediated conditions and for working capital and other general corporate purposes.

We plan to use our existing cash and cash equivalents to fund the development of Haduvio for the treatment of pruritus associated with prurigo nodularis and the treatment of chronic cough in patients with IPF and for working capital and other general corporate purposes.

We will be required to expend significant funds in order to advance the development of Haduvio in multiple indications, as well as any future product candidates we may seek to develop.

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We do not have any committed external source of funds.

Accordingly, we will be required to obtain further funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sour ces to achieve our business objectives.

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

Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to purs ue our business strategy.

We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into the first half of 2022.

Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.

We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2022.

Our estimate as to how long we expect our existing cash and cash equivalents to continue to fund our operations is based on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.

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Our future funding requirements, both short-term and long-term, will depend on many factors, including:

the scope, progress, timing, costs and results of clinical trials of Haduvio for the treatment of pruritus associated with prurigo nodularis, including the increase in the target number of enrolled patients for our ongoing Phase 2b/3 PRISM trial from 240 to 360 subjects based on the SSRE analysis, as well as the scope, progress, timing, costs and results of clinical trials of Haduvio for other serious neurologically mediated conditions, including our ongoing Phase 2 trial for chronic cough in patients with IPF, as well as any future product candidates;

the scope, progress, timing, costs and results of clinical trials of Haduvio for the treatment of pruritus associated with prurigo nodularis, as well as the scope, progress, timing, costs and results of clinical trials of Haduvio for other serious neurologically mediated conditions, including our ongoing Phase 2 CANAL trial, as well as any future product candidates;

the impacts of the COVID-19 pandemic on the scope, progress, timing, costs and results of our ongoing and planned clinical trials of Haduvio;

the number and characteristics of indications for which we seek to develop Haduvio or any future product candidates, and their respective development requirements;

the outcome, timing and costs of clinical and nonclinical trials and of seeking regulatory approvals, including the costs of supportive clinical studies such as our planned human abuse liability, or HAL, study and our planned Thorough QT, or TQT, studies;

the costs associated with the manufacture of necessary quantities of Haduvio or any future product candidate for clinical development in connection with regulatory submissions;

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the costs of operating as a public company;

our ability to continue as a going concern.

Our indebtedness could adversely affect our financial condition or restrict our future operations.

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The SVB Term Loan bears interest at a floating rate per annum equal to the greater of (A) the prime rate plus 1.00% and (B) 4.25%.

If SVB receives evidence satisfactory to it that the Company has (i) received positive data for the PRISM trial sufficient to advance Haduvio into a second Phase 3 clinical trial for prurigo nodularis, and (ii) raised sufficient financing to fund such Phase 3 clinical trial and the Company’s operations, the interest rate under the SVB Term Loan will be adjusted to a floating rate equal to the greater of (A) the prime rate plus 3.00% and (B) 6.25%.

If SVB receives evidence satisfactory to it that the Company has (i) received positive data for the Phase 2b/3 PRISM trial sufficient to advance Haduvio into a second Phase 3 clinical trial for prurigo nodularis, and (ii) raised sufficient financing to fund such Phase 3 clinical trial and the Company’s operations, the interest rate under the SVB Term Loan will be adjusted to a floating rate equal to the greater of (A) the prime rate plus 3.00% and (B) 6.25%.

On the first business day of each month we are required to make monthly interest payments and commencing on March 1, 2022, we will be required to repay the SVB Term Loan in 24 consecutive installments of principal plus monthly payments of accrued interest.

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The SVB Loan Agreement also includes customary affirmative and negative covenants, including a requirement to maintain our bank accounts with SVB or bank accounts that are subject to SVB’s control and limitations on transferring all or any part of our business or property, changing our business, liquidating or dissolving, permitting a change in control, adding new offices or business locations, changing jurisdiction of organization, organizational structure or legal name, merging with or acquiring another entity, incurring additional indebtedness, creating any lien on our property, paying dividends or redeeming stock, entering into material transactions with an affiliate or making payments on subordinated debt.

Additionally, if we fail to meet certain equity raise requirements under the SVB Loan Agreement, we will be required to deposit unrestricted and unencumbered cash equal to 100% of the principal amount of the SVB Term Loan then outstanding in a cash collateral account with SVB, which can be used by SVB to prepay the SVB Term Loan at any time.

Additionally, if we fail to meet certain equity raise requirements under the SVB Loan Agreement, including raising $12.0 million by June 30, 2021, we will be required to deposit unrestricted and unencumbered cash equal to 100% of the principal amount of the SVB Term Loan then outstanding in a cash collateral account with SVB, which can be used by SVB to prepay the SVB Term Loan at any time.

Our debt combined with our other financial obligations and contractual commitments could have significant adverse consequences, including:

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The occurrence and continuation of an event of default could cause interest to be charged at the rate that is otherwise applicable plus 5.00% (unless SVB elects to impose a smaller increase) and would provide SVB with the right to accelerate all obligations under the SVB Loan Agreement and exercise remedies against us and the collateral securing the SVB Term Loan and other obligations under the SVB Loan Agreement, including foreclosure against assets securing the SVB Term Loan and other obligations under the SVB Loan Agreement, including our cash.

In addition, the covenants under the SVB Loan Agreement and the pledge of substantially all of our assets, excluding our intellectual property (which is subject to a negative pledge under the SVB Loan Agreement), as collateral on the SVB Term Loan may limit our ability to obtain additional debt financing.

In addition, the covenants under the SVB Loan

Agreement and the pledge of substantially all of our assets, excluding our intellectual property (which is subject to a negative pledge under the SVB Loan Agreement), as collateral on the SVB Term Loan may limit our ability to obtain additional debt financing.

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

We expect our expenses to increase substantially in connection with our planned operations, particularly as we conduct our ongoing PRISM trial and our other ongoing clinical trials as well as the additional Phase 3 clinical trial we will need to conduct for Haduvio for the treatment of pruritus associated with prurigo nodularis and develop Haduvio for the treatment of other serious neurologically mediated conditions.

To the extent that we raise additional capital through the sale of common stock, convertible

securities or other equity securities, your ownership interest may be diluted, and the terms of these securities could include liquidation or other preference s and anti-dilution protections that could adversely affect your rights as a common stockholder.

We expect our expenses to increase substantially in connection with our planned operations, particularly as we conduct our ongoing Phase 2b/3 PRISM trial and our other ongoing clinical trials as well as the additional Phase 3 clinical trial we believe we will need to conduct for Haduvio for the treatment of pruritus associated with prurigo nodularis and develop Haduvio for the treatment of other serious neurologically mediated conditions.

To the extent that we raise additional capital through the sale of common stock, convertible securities or other equity securities, your ownership interest may be diluted, and the terms of these securities could include liquidation or other preferences and anti-dilution protections that could adversely affect your rights as a common stockholder.

Our ability to obtain further debt financing may be limited by the covenants under the SVB Loan Agreement, which include a covenant not to incur additional indebtedness as well as the pledge of substantially all of our assets, excluding our intellectual property (which is subject to a negative pledge under the SVB Loan Agreement), as collateral on the SVB Term Loan.

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The success of Haduvio for the treatment of pruritus associated with prurigo nodularis, as well as for other serious neurologically mediated conditions, will depend on several factors, including the following:

successfully recruiting, enrolling and retaining patients in and completing our PRISM trial, including the 120 additional subjects we plan to add to the trial as a result of the SSRE analysis;

initiating and successfully recruiting, enrolling and retaining patients in and completing additional clinical and nonclinical trials, including the additional Phase 3 clinical trial we will need to conduct for Haduvio for the treatment of pruritus associated with prurigo nodularis and other supportive clinical studies such as our planned HAL study and TQT studies;

successfully recruiting, enrolling and retaining patients in and completing our Phase 2b/3 PRISM trial, including the additional 120 patients we intend to enroll based on the SSRE analysis;

initiating and successfully recruiting, enrolling and retaining patients in and completing additional clinical and nonclinical trials, including the additional Phase 3 clinical trial we believe we will need to conduct for Haduvio for the treatment of pruritus associated with prurigo nodularis and other supportive clinical studies such as our planned HAL study and a potential TQT study;

demonstrating safety, tolerability and efficacy profiles that are satisfactory to the FDA, EMA and other comparable regulatory authorities for marketing approval;

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establishing a focused, specialty sales organization in the United States and successfully launching commercial sales following any marketing approval;

obtaining commercial acceptance of our products, if approved, by patients, the medical community and third-p arty payors and obtaining and maintaining healthcare coverage and adequate reimbursement;

obtaining commercial acceptance of our products, if approved, by patients, the medical community and third-party payors and obtaining and maintaining healthcare coverage and adequate reimbursement;

maintaining an acceptable safety profile following any marketing approval;

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While we believe that nalbuphine’s dual mechanism of action, which targets both the central and peripheral nervous systems, makes Haduvio a promising potential therapy for the treatment of chronic pruritus and other serious neurologically mediated conditions, and that Haduvio has the potential to be safe and well-tolerated, nalbuphine has not been approved in any indications other than pain.

Additionally, nalbuphine ER has not been approved in any indication, including the treatment of pruritus associated with prurigo nodularis, the lead indication for which we are pursuing clinical development of nalbuphine ER.

Additionally, Haduvio has not been approved in any indication, including the treatment of pruritus associated with prurigo nodularis, the lead indication for which we are pursuing clinical development of Haduvio.

No therapies have been approved in the United States or Europe for the treatment of moderate to severe pruritus, and we can provide no assurance that either Haduvio or any other future product candidate that we may seek to develop for this indication or for any other serious neurologically mediated condition will be effective or safe, obtain regulatory approval or be commercially successful.

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the FDA or comparable foreign regulatory authorities may refuse to accept for substantive review any NDA, MAA or other comparable foreign regulatory application that we submit for a product candidate or may conclude after review of our data that our application is insufficient to obtain marketing approval of a product candidate.

In addition to the above, the continued spread of COVID-19 globally could adversely affect our clinical trial operations worldwide, includ ing our ability to recruit and retain principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 if an outbreak occurs in their geography , and result in further delays in our clinical trials due to prioritization of hospital and medical resources toward the outbreak, restrictions in travel, potential unwillingness of patients to enroll in trials at this time, or the inability of patients to comply with clinical trial protocols if quarantines or travel rest rictions impede patient movement or interrupt healthcare services.

In addition to the above, the continued spread of COVID-19 globally could adversely affect our clinical trial operations worldwide , including our ability to recruit and retain principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 if an outbreak occurs in their geography , and result in further delays in our clinical trials due to prioritization of hospital and medical resources toward the outbreak, restrictions in travel, potential unwillingness of patients to enroll in trials at this time, or the inability of patients to comply with clinical trial protocols if quarantines or travel restrictions impede patient movement or interrupt healthcare services.

Furthermore, the response to the COVID-19 pandemic may redirect resources of regulators in a way that would adversely impact our ability to progress regulatory approvals.

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

obtain marketing approval with labeling that include s significant use or distribution restrictions or significant safety warnings, including boxed warnings;

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

be subject to additional post-marketing testing or other requirements;

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For example, patients with prurigo nodularis may have pruritus that is caused by dermatological conditions other than prurigo nodularis, and at a meeting with the FDA following the completion of our Phase 2 clinical trial of Haduvio for the treatment of pruritus associated with prurigo nodularis, the FDA raised the need to adequately isolate a patient population with pruritus associated with prurigo nodularis for our planned Phase 3 clinical trials.

While the inclusion criteria in our PRISM trial require that enrolled patients not be suffering from any active, uncontrolled dermatoses other than prurigo nodularis, it is possible that the FDA could conclude that this is not sufficient to identify patients suffering from pruritus associated with prurigo nodularis, in which case the FDA could question the overall validity of the results of the trial.

While the inclusion criteria in our Phase 2b/3 PRISM trial require that enrolled patients not be suffering from any active, uncontrolled dermatoses other than prurigo nodularis, it is possible that the FDA could conclude that this is not sufficient to identify patients suffering from pruritus associated with prurigo nodularis, in which case the FDA could question the overall validity of the results of the trial.

To the extent that the results of our clinical trials are not satisfactory to the FDA or foreign regulatory authorities for support of a marketing application, approval of product candidates may be significantly delayed, or we may be required to expend significant additional resources, which may not be available to us, to conduct additional trials in support of potential approval of product candidates.

For instance, if Haduvio does not achieve the primary endpoint in our PRISM trial, or the FDA does not otherwise believe that the results of the trial are sufficiently supportive of an application for marketing approval, the FDA may require us to conduct another Phase 3 clinical trial in addition to the PRISM trial and the additional Phase 3 clinical trial we plan to conduct, which would cause us to incur substantial additional costs and significantly delay our development of Haduvio for the treatment of pruritus associated with prurigo nodularis.

For instance, if Haduvio does not achieve the primary endpoint in our Phase 2b/3 PRISM trial, or the FDA does not otherwise believe that the results of the trial are sufficiently supportive of an application for marketing approval, the FDA may require us to conduct another Phase 3 clinical trial in addition to the Phase 2b/3 PRISM trial and the additional Phase 3 clinical trial we believe we need to conduct, which would cause us to incur substantial additional costs and significantly delay our development of Haduvio for the treatment of pruritus associated with prurigo nodularis.

Use of patient-reported outcome assessments, or PROs, in our clinical trials and high placebo response rates may delay or impair the development of Haduvio or adversely impact our clinical trials.

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For example, the primary endpoint of our Phase 2 clinical trial of Haduvio for the treatment of pruritus associated with prurigo nodularis was the proportion of patients reporting at least a 30% reduction from baseline to week 10 in seven-day mean Worst Itching Numerical Rating Scale, or WI-NRS, scores, which is a patient-reported assessment on an 11-point scale from 0 to 10 of the severity of the worst itch experienced in the last 24 hours.

The primary endpoint of our PRISM trial is the proportion of patients achieving at least a 4-point improvement from baseline with respect to their worst itch at week 14 as measured by WI-NRS.

The primary endpoint of our Phase 2b/3 PRISM trial is the proportion of patients achieving at least a 4-point improvement from baseline with respect to their worst itch at week 14 as measured by WI-NRS.

PROs have an important role in the development and regulatory approval of treatments for pruritus.

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We observed this in some of our clinical trials of Haduvio.

For example, in our Phase 2 clinical trial of Haduvio for the treatment of pruritus associated with prurigo nodularis, we observed a mean reduction from baseline in WI-NRS score for the trial’s modified inten tion-to-treat population of 1.75 points for placebo as compared to 2.14 points for Haduvio dosed twice-daily at 81 mg and 2.51 points for Haduvio dosed twice-daily at 162 mg.

The variability of PRO measures may be greater than other measures used for clini cal trial assessments, and that variability can complicate clinical trial design, adversely impact the ability of a trial to show a statistically significant improvement and generally adversely impact a clinical development program by introducing additiona l uncertainties.

For example, in our Phase 2 clinical trial of Haduvio for the treatment of pruritus associated with prurigo nodularis, we observed a mean reduction from baseline in WI-NRS score for the trial’s modified intention-to-treat population of 1.75 points for placebo as compared to 2.14 points for Haduvio dosed twice-daily at 81 mg and 2.51 points for Haduvio dosed twice-daily at 162 mg.

The variability of PRO measures may be greater than other measures used for clinical trial assessments, and that variability can complicate clinical trial design, adversely impact the ability of a trial to show a statistically significant improvement and generally adversely impact a clinical development program by introducing additional uncertainties.

The variability of PRO measures and related high placebo response rates have adversely impacted clinical results of other therapies being tested for pruritus and could adversely impact our clinical development of Haduvio.

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In particular, the successful completion of our clinical development program for Haduvio for the treatment of pruritus associated with prurigo nodularis is dependent upon our ability to enroll a sufficient number of patients with this severe condition.

We have experienced delays and difficulties in the enrollment of patients in our clinical trials, including our PRISM trial and our Phase 2 clinical trial for chronic cough in patients with IPF, which have delayed the completion of our trials.

We have taken actions to increase enrollment, including increasing the number of clinical sites, providing sites with additional trial management staff and closing underperforming sites.

We have experienced delays and difficulties in the enrollment of patients in our clinical trials, including our Phase 2b/3 PRISM trial and our Phase 2 CANAL trial, which have delayed the completion of our trials.

We have taken actions to increase enrollment, including increasing the number of clinical sites, expanding our clinical trials into additional countries, providing sites with additional trial management staff and closing underperforming sites.

However, these actions may not be successful.

In addition, a s a result of the COVID-19 pandemic, clinical sites for our PRISM trial temporarily halted new patient screening and most patient enrollment.

In addition, the clinical sites in our ongoing Phase 2 trial for chronic cough in patients with IPF temporarily suspended enrollment and treatment of patients in the trial due to the vulnerability of IPF patients to COVID-19 and we recently amended the protocol for the trial to reduce the number of in-person patient visits and procedures.

Furthermore, a s a result of the SSRE analysis, we have increased the target number of enrolled patients for our PRISM trial from 240 to 360 subjects, which has also resulted in delays to our expected completion of enrollment for the trial and our anticipated timing for reporting top-line data for the trial.

Other companies are conducting clinical trials or have announced plans for future clinical trials that are seeking, or are likely to seek, to enroll patients with prurigo nodularis in the case of our PRISM trial and patients with IPF in the case of our Phase 2 clinical trial for chronic cough in patients with IPF, and patients are generally only able to enroll in a single trial at a time.

although there are no drugs approved in the United States or Europe for the treatmen t of pruritus associated with prurigo nodularis, many patients use various treatments off-label, such as antihistamines or gabapentin, and these patients and their physicians may be reluctant to forgo, discontinue or otherwise alter their use of such off-l abel therapeutic approaches to participate in our clinical trials.

In addition, as a result of the COVID-19 pandemic, clinical sites for our Phase 2b/3 PRISM trial temporarily halted new patient screening and most patient enrollment.

After resuming screening and enrollment, multiple sites in the Phase 2b/3 PRISM trial have begun requiring remote

monitoring of patient data.

In addition, the clinical sites in our ongoing Phase 2 CANAL trial temporarily suspended enrollment and treatment of patients in the trial due to the vulnerability of IPF patients to COVID-19 and we amended the protocol for the trial to reduce the number of in-person patient visits and procedures.

This directive expired in March 2021 and we expect the other COVID-19 related restrictions will continue to be lifted through June 2021, assuming the pandemic does not worsen in the United Kingdom .

I nitial screening activity has resumed at certain sites following the lifting of the shelter in place directive .

However, we expect that some sites may take longer to resume their trial activity due to increased COVID-19 infection rates in the areas where they are located that other sites may cease to participate in the trial entirely.

We have decided not to pursue opening new clinical sites in Germany due to the estimated timing and cost to add these additional sites.

Instead, in light of the easing of pandemic restrictions in the United Kingdom, we are focusing our efforts on the completion of enrollment in the Phase 2 CANAL trial in the United Kingdom.

Furthermore, a s a result of the SSRE analysis, we have increased the target number of enrolled patients for our Phase 2b/3 PRISM trial from 240 to 360 subjects, which has also resulted in delays to our expected completion of enrollment for the trial and our anticipated timing for reporting top-line data for the trial.

Other companies are conducting clinical trials or have announced plans for future clinical trials that are seeking, or are likely to seek, to enroll patients with prurigo nodularis in the case of our Phase 2b/3 PRISM trial and patients with IPF in the case of our Phase 2 CANAL trial, and patients are generally only able to enroll in a single trial at a time.

In addition, although there are no drugs approved in the United States or Europe for the treatment of pruritus associated with prurigo nodularis, many patients use various treatments off-label, such as antihistamines or gabapentin, and these patients and their physicians may be reluctant to forgo, discontinue or otherwise alter their use of such off-label therapeutic approaches to participate in our clinical trials.

Our inability to enroll a sufficient number of patients for our clinical trials could result in significant delays or may require us to abandon one or more clinical trials altogether.

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The drug label for nalbuphine, the active ingredient in Haduvio, carries an opioid class label warning for serious, life-threatening or fatal respiratory depression, and Haduvio, if approved for marketing in any indication, will likely carry a similar opioid class label.

To support our planned submission of an NDA to the FDA for Haduvio, we will be required to conduct a clinical trial of Haduvio to assess cardiac risk and, due to the association of opioids with endocrine dysfunction, a clinical trial to evaluate potential endocrine side effects.

To support our planned submission of an NDA to the FDA for Haduvio, we may be required to conduct a clinical trial of Haduvio to assess cardiac risk and, due to the association of opioids with endocrine dysfunction, a clinical trial to evaluate potential endocrine side effects.

We cannot be certain that any of these side effects often associated with opioids, or other side effects, will not be observed, or observed at more severe levels, in the future, or that the FDA will not require additional trials or impose more severe labeling restrictions due to these side effects or other concerns.

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Furthermore, risks of Haduvio that are not adequately addressed through a proposed REMS program for Haduvio may also prevent or delay any approval for commercialization.

In addition, while nalbuphine is currently not classified as a controlled substance under the federal Controlled Substances Act of 1970, or the CSA, or the regulations of the U.S.

In addition, while the intravenous formulation of nalbuphine is currently not classified as a controlled substance under the federal Controlled Substances Act of 1970, or the CSA, or the regulations of the U.S.

Drug Enforcement Agency, or the DEA, it is the only opioid analgesic that is approved for marketing in the United States that is not classified as a controlled substance.

It is possible that, based on the results of our HAL study, adverse events in our clinical trials or for other reasons, the DEA could determine that Haduvio should be classified as a controlled substance.

It is possible that, based on the results of our HAL study, adverse events in our clinical trials or for other reasons, the DEA could determine that Haduvio, which is an oral, extended release formulation, should be classified as a controlled substance.

The DEA regulates controlled substances as Schedule I, II, III, IV or V substances.

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The DEA may seek civil penalties, refuse to renew necessary registrations or initiate proceedings to revoke those registrations.

In some circumstances, violations could lead to criminal proceedings.

In some circumstances,

violations could lead to criminal proceedings.

Because of the restrictive nature of these regulations, if Haduvio is classified as a controlled substance, depending on how it is scheduled, its commercial prospects could be limited.

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Similarly, the design of a clinical trial can determine whether its results will support marketing approval of a product and adjustments in the design of a clinical trial may not be possible once the clinical trial has commenced.

At a meeting with the FDA following the completion of our Phase 2 clinical trial of Haduvio for the treatment of pruritus associated with prurigo nodularis, the FDA advised us that the findings of the Phase 2 clinical trial may not be reliable and recommen ded that we conduct an additional Phase 2 dose ranging trial to identify the optimal dose and obtain reliable estimates of treatment effect for the recommended primary efficacy endpoint so as to better design and power our planned Phase 3 clinical trials.

In providing such advice, the FDA noted the small number of patients in each arm of the Phase 2 clinical trial and the large differential discontinuation rate among the three treatment arms, as well as our plan to increase the fixed-dose treatment duration from eight weeks in the Phase 2 clinical trial to 12 weeks in our PRISM trial.

At a meeting with the FDA following the completion of our Phase 2 clinical trial of Haduvio for the treatment of pruritus associated with prurigo nodularis, the FDA advised us that the findings of the Phase 2 clinical trial may not be reliable and recommended that we conduct an additional Phase 2 dose ranging trial to identify the optimal dose and obtain reliable estimates of treatment effect for the recommended primary efficacy endpoint so as to better design and power our planned Phase 3 clinical trials.

We have limited experience in designing pivotal clinical trials, and flaws in the design of a clinical trial could result in significant delays in completing the clinical trial or may require us to abandon the clinical trial altogether or conduct additional clinical trials.

For example, we have designed our PRISM trial based on an assumed discontinuation rate that takes into account observed discontinuation rates in our Phase 2 clinical trial of Haduvio for the treatment of pruritus associated with prurigo nodularis.

If enrolled patients withdraw from our PRISM trial at a rate that is higher than expected, as occurred in our Phase 2 clinical trial of Haduvio for the treatment of pruritus associated with prurigo nodularis, or at rates that are inconsistent across clinical sites and treatment arms, we may not achieve the primary endpoint of the trial, the validity or statistical significance of the trial could be impaired and regulatory authorities may not view the trial as supportive of an application for marketing approval.

For example, we have designed our Phase 2b/3 PRISM trial based on an assumed discontinuation rate that takes into account observed discontinuation rates in our Phase 2 clinical trial of Haduvio for the treatment of pruritus associated with prurigo nodularis.

If enrolled patients withdraw from our Phase 2b/3 PRISM trial at a rate that is higher than expected, as occurred in our Phase 2 clinical trial of Haduvio for the treatment of pruritus associated with prurigo nodularis, or at rates that are inconsistent across clinical sites and treatment arms, we may not achieve the primary endpoint of the trial, the validity or statistical significance of the trial could be impaired and regulatory authorities may not view the trial as supportive of an application for marketing approval.

Preclinical and clinical data are also often susceptible to varying interpretations and analyses.

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In addition, some of our data for Haduvio for the treatment of pruritus is drawn from post hoc analyses of data subsets from our Phase 2 clinical trials of Haduvio in patients with prurigo nodularis and uremic pruritus.

While we believe these data may be useful in informing the design of our PRISM trial and other future Phase 3 clinical trials for Haduvio, post hoc analyses performed after unmasking trial results can result in the introduction of bias and may not be predictive of success in Phase 3 clinical trials.

While we believe these data may be useful in informing the design of our Phase 2b/3 PRISM trial and other future Phase 3 clinical trials for Haduvio, post hoc analyses performed after unmasking trial results can result in the introduction of bias and may not be predictive of success in Phase 3 clinical trials.

In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same product candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of patient populations, changes in and adherence to dosing regimens and other clinical trial protocols, as well as the rate of discontinuation among clinical trial participants.

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Any of these events could harm our business and operations and could negatively impact our stock price.

Even if Haduvio or any future product candidate receives marketing approval, it may fail to achieve the degree of market ac ceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success, in which case the market opportunity for Haduvio may be smaller than we estimate and we may not generate significant revenues or beco me profitable.

Even if Haduvio or any future product candidate receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success, in which case the market opportunity for Haduvio may be smaller than we estimate and we may not generate significant revenues or become profitable.

We have never commercialized a product, and even if Haduvio or any future product candidate is approved by the appropriate regulatory authorities for marketing and sale, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community.

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

Our spending on current and futur e development programs and product candidates for specific indications may not yield any commercially viable product candidates.

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

Our spending on current and future development programs and product candidates for specific indications may not yield any commercially viable product candidates.

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

If we are unable to establish sales, marketing and distribution capabilities or enter into sales, marketing and distribution arrangements with third parties, we may not be successful in commercializing Haduvio or any future product candidates if and when they are approved.

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Our competitors also may obtain FDA or other marketing approval for their products before we are able to obtain approval for ours, which could result in competitors establishing a strong market position before we are able to enter the applicable market.

If Haduvio is approved for the treatment of pruritus associated with prurigo nodularis, we expect that it would compete with a number of therapeutics that are used off-label to treat prurigo nodularis, including ant i-itch creams and emollients, oral or injectable antihistamines, Dupixent (dupilumab), which is an injectable prescription medicine approved for atopic dermatitis that is in clinical development for the treatment of pruritus associated with prurigo nodular is, gabapentin and Lyrica (pregabalin), which are prescription medicines approved for the treatment of seizures and neuropathic pain, naltrexone and UVB light therapy.

We also expect that Haduvio might compete with product candidates currently in clinical development in this indication, including nemolizumab, an anti-interleukin-31 receptor A humanized monoclonal antibody being developed by Galderma;

and KPL-716, a monoclonal antibody targeting oncostatin M receptor beta being developed by Kiniksa Pharmaceu ticals.

In addition, a number of other product candidates are currently in clinical development to treat other pruritic conditions and Haduvio , if approved for the treatment of pruritus associated with prurigo nodularis could face competition from these pr oduct candidates, including tradipitant, an oral neurokinin-1 receptor antagonist being developed by Vanda Pharmaceuticals that is in Phase 3 clinical trials for chronic pruritus in patients with atopic dermatitis.

If Haduvio is approved for the treatment of chronic cough associated with IPF, we expect that it would compete with product candidates currently in development for the treatment of chronic cough associated with IPF, such as ifenprodil which is being developed by Algernon Pharmaceuticals, and expect that it might also compete with other product candidates currently in development for the treatment of chronic refractory cough by companies including Merck, Shionogi, Bellus Health, Bayer and Nerre Therapeutics.

If Haduvio is approved for the treatment of pruritus associated with prurigo nodularis, we expect that it would compete with a number of therapeutics that are used off-label to treat prurigo nodularis, including anti-itch creams and emollients, oral or injectable antihistamines, Dupixent (dupilumab), which is an injectable prescription medicine approved for atopic dermatitis that is in clinical development for the treatment of pruritus associated with prurigo nodularis, gabapentin and Lyrica (pregabalin), which are prescription medicines approved for the treatment of seizures and neuropathic pain, naltrexone and UVB light therapy.

We also expect that Haduvio might compete with product candidates currently in clinical development in this indication, including nemolizumab, an anti-interleuk in-31 receptor A humanized monoclonal antibody being developed by Galderma;

KPL-716, a monoclonal antibody targeting oncostatin M receptor beta being developed by Kiniksa Pharmaceuticals;

and CDX-0159, a humanized monoclonal antibody targeting the KIT receptor being developed by Celldex Therapeutics.

In addition, a number of other product candidates are currently in clinical development to treat other pruritic conditions and Haduvio, if approved for the treatment of pruritus associated with prurigo nodularis, could face competition from these product candidates, including difelikefalin, an oral kappa opioid receptor agonist being developed by Cara Therapeutics that is in Phase 2 clinical trials for chronic pruritus in patients with atopic dermatitis, chronic liver disease, chronic kidney disease, and notalgia paresthetica.

If Haduvio is approved for the treatment of chronic cough associated with IPF, we expect that it would compete with product candidates currently in clinical development for the treatment of chronic cough associated with IPF, such as ifenprodil which is being developed by Algernon Pharmaceuticals, and orvepitant, which is being developed by Nerre Therapeutics, and expect that it might also compete with other product candidates currently in development or submitted for approval to the FDA for the treatment of chronic refractory cough and unexplained chronic cough by companies including Merck, Shionogi, Bellus Health and Bayer.

In addition, it is possible that product candidates currently in development for the treatment of IPF could, if approved, reduce the need for therapies to treat chronic cough associated with IPF.

If Haduvio is approved for the treatment of pruritus associated with primary biliary cholangitis, or PBC, we expect that it would compete with a number of therapeutics that are used off-label to treat pruritus associated with chronic liver disease, including PBC, which may include bile acid sequestrants, such as cholestyramine, which are used off-label and generally as first-line therapy, although they typically provide only modest relief.

Cholestyramine is marketed as Questran in the United States and as Colestyr, Efensol, Ipocol, Kolestran, Lipocol, Olestyr, Prevalite or Quantalan in various other countries.

Treatment of pruritus associated with chronic liver disease, including PBC, may also include second-line therapies such as the antibiotic rifampicin, naltrexone, the anti-depressant sertraline, as well as phototherapy and drugs such as gabapentin and Lyrica (pregabalin), which are prescription medicines approved for the treatment of seizures and neuropathic pain.

We also expect that Haduvio might compete with product candidates currently in clinical development in this indication, including Korsuva (difelikefalin), an orally administered κ-opioid receptor agonist being developed by Cara Therapeutics, and linerixibat, an ileal bile acid transporter inhibitor being developed by GlaxoSmithKline, both of which are in Phase 2 clinical trials for pruritus associated with PBC.

In addition, it is possible that therapies to reduce chronic liver disease, such as ursodeoxycholic acid, which is approved for the treatment of PBC, could reduce the need for therapies to treat pruritus associated with chronic liver disease, including PBC.

If Haduvio is approved for the treatment of levodopa-induced dyskinesia, or LID, in patients with Parkinson’s disease, we expect that it would compete with Gocovri and Osmolex, which are extended release capsule formulations of amantadine marketed by Adamas Pharmaceuticals and Osmotica, respectively, and expect that it might also compete with other product candidates currently in development for the treatment of LID by companies including Addex Therapeutics and IRLAB Therapeutics.

If Haduvio is approved for the treatment of levodopa-induced dyskinesia, or LID, in patients with Parkinson’s disease, we expect that it would compete with Gocovri and Osmolex, which are extended release capsule formulations of amantadine marketed by Adamas Pharmaceuticals and expect that it might also compete with other product candidates currently in development for the treatment of LID by companies including Addex Therapeutics and IRLAB Therapeutics.

In addition, it is possible that product candidates currently in development for the treatment of Parkinson’s disease by companies could, if approved, reduce the need for therapies to treat LID.

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The FDA may not approve an ANDA for a generic product until any applicable period of non-patent exclusivity for the reference-listed drug has expired.

The Federal Food, Drug, and Cosmetic Act, or FDCA, provides a period of five years of non-patent exclusiv ity for a new drug containing a new chemical entity, or NCE.

Specifically, in cases where such exclusivity has been granted, an ANDA may not be filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV cer tification that a patent covering the reference-listed drug is either invalid or will not be infringed by the generic product, in which case the applicant may submit its application four years following approval of the reference-listed drug.

The Federal Food, Drug, and Cosmetic Act, or FDCA, provides a period of five years of non-patent exclusivity for a new drug containing a new chemical entity, or NCE.

Specifically, in cases where such exclusivity has been granted, an ANDA may not be filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification that a patent covering the reference-listed drug is either invalid or will not be infringed by the generic product, in which case the applicant may submit its application four years following approval of the reference-listed drug.

It is unclear whether the FDA will treat the active moieties in our product candidates as NCEs and, therefore, afford them five years of NCE data exclusivity if they are approved.

If any product we develop does not receive five years of NCE exclusivity, the FDA may appr ove generic versions of such product three years after its date of approval, subject to the requirement that the ANDA applicant certifies to any patents listed for our products in the Orange Book.

Manufacturers may seek to launch these generic products fol lowing the expiration of the applicable marketing exclusivity period, even if we still have patent protection for our product.

If any product we develop does not receive five years of NCE exclusivity, the FDA may approve generic versions of such product three years after its date of approval, subject to the requirement that the ANDA applicant certifies to any patents listed for our products in the Orange Book.

Manufacturers may seek to launch these generic products following the expiration of the applicable marketing exclusivity period, even if we still have patent protection for our product.

Competition from generic versions of any products we develop could negatively impact our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on our investments in those products.

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Additionally, if new compounds currently in development by potential competitors obtain marketing approval, there may be downward pressure on reimbursement levels for therapies in our target indications, which could have a negative impact on our ability to achieve and maintain profitability.

There may also be delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the indications for which the drug is approved by the FDA or com parable foreign regulatory authorities.

Moreover, eligibility for reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including development, manufacture, sale and distribution.

Reimbursement rates ma y vary, by way of example, according to the use of the product and the clinical setting in which it is used.

Reimbursement rates may also be based on reimbursement levels already set for lower cost drugs or may be incorporated into existing payments for ot her services.

eligibility for reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including development, manufacture, sale and distribution.

Reimbursement rates may vary, by way of example, according to the use of the product and the clinical setting in which it is used.

Reimbursement rates may also be based on reimbursement levels already set for lower cost drugs or may be incorporated into existing payments for other services.

In addition, increasingly, third-party payors are requiring higher levels of evidence of the benefits and clinical outcomes of new therapies and are challenging the prices charged for new products.

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Further, although our reliance on these third parties for clinical development activities limits our control over these activities, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol, as well as applicable legal, regulatory and scientific standards.

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

The FDA enforces these cGCPs through periodic inspections of cl inical trial sponsors, principal investigators, clinical trial sites and institutional review boards.

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

The FDA enforces these cGCPs through periodic inspections of clinical trial sponsors, principal investigators, clinical trial sites and institutional review boards.

If we or our third-party contractors fail to comply with applicable cGCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA may require us to perform additional clinical trials before approving the applicable product candidate, which would delay the marketing approval process.

We cannot be certain that, upon inspection, the FDA will determine that any of our clinical t rials complies with cGCPs.

We cannot be certain that, upon inspection, the FDA will determine that any of our clinical trials complies with cGCPs.

Similar regulatory requirements apply outside the United States, including the International Council for Harmonisation of Technical Requirements for the Registration of Pharmaceuticals for Human Use, or ICH.

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We do not have long-term supply agreements with any of our contract manufacturers.

If any of our existing manufacturers should become unavailable to u s for any reason, or fail to supply u s with the ordered quantities, including as a result of the COVID-19 pandemic or government measures taken in response to the pandemic, we may incur delays in identifying or qualifying replacement manufacturers or in ob taining replacement supply .

If any of our existing manufacturers should become unavailable to us for any reason, or fail to supply us with the ordered quantities, including as a result of the COVID-19 pandemic or government measures taken in response to the pandemic, we may incur delays in identifying or qualifying replacement

manufacturers or in obtaining replacement supply.

Any performance failure on the part of our contract manufacturers or the other third-party contractors that we use to store and distribute drug substance and drug product could be disruptive to our operations and delay clinical development or marketing approval of Haduvio or any future product candidates of ours or commercialization of any resulting products, producing additional losses and depriving us of potential product revenue.

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Any significant delay in acquisition, increase in cost or decrease in availability of nalbuphine hydrochloride drug substance could considerably delay the manufacture of Haduvio, which could adversely impact the timing of our current and planned clinical trials and potential regulatory approval and commercialization of Haduvio.

Although we believe there are alternate sources of supply that could satisfy our clinical and commercial requirements for nalbuphine drug substance, we have not qualified any alternate sources and cannot assure you that we would be able to establish relationships with any such sources in a timely fashion, on commercially reasonable terms or at all.

Although we are evaluating alternate sources of supply that could satisfy our clinical and commercial requirements for nalbuphine drug substance, we have not qualified any alternate sources and cannot assure you that we would be able to establish relationships with any such sources in a timely fashion, on commercially reasonable terms or at all.

If Haduvio or any future product candidates are approved by any regulatory agency, we will need to enter into agreements with third-party contract manufacturers for the commercial production and distribution of those products.

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We face significant competition in seeking appropriate collaborators.

There have been a significant number of recent business combinations a mong large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.

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

Those factors may include the potential differentiation of our product candidates from competing product candidates, des ign or results of clinical trials, the likelihood of approval by the FDA or comparable foreign regulatory authorities and the regulatory pathway for any such approval, the potential market for the product candidate, the costs and complexities of manufactur ing and delivering the product to patients and existing or potential competing products.

The collaborator may also consider alternative product candidates or technologies for similar indications that may be available for collaboration and whether such a co llaboration could be more attractive than a collaboration with us.

Any collaboration agreements that we enter into in the future may also contain restrictions on our ability to enter into other potential collaborations or to develop specified product candi dates.

There have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.

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

evaluation of a number of factors.

Those factors may include the potential differentiation of our product candidates from competing product candidates, design or results of clinical trials, the likelihood of approval by the FDA or comparable foreign regulatory authorities and the regulatory pathway for any such approval, the potential market for the product candidate, the costs and complexities of manufacturing and delivering the product to patients and existing or potential competing products.

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

Any collaboration agreements that we enter into in the future may also contain restrictions on our ability to enter into other potential collaborations or to develop specified product candidates.

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

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

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

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

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

collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability, or misappropriate our intellectual property or other proprietary information;

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If disputes over intellectual property that we license prevent or impair our ability to maintain those license arrangements on acceptable terms or at all, we may be unable to successfully develop and commercialize any affected product candidates.

If we are unable to obtain and maintain sufficient patent protection for nalbuphine ER, or any future product ca ndidate, and the disease indications for which we are developing, or may in the future develop , nalbuphine ER, or if the scope of the patent protection is not sufficiently broad, competitors could develop and commercialize products similar or identical to such product candidate, and our ability to successfully commercialize such product candidate may be adversely affected.

If we are unable to obtain and maintain sufficient patent protection for Haduvio, or any future product candidate, and the disease indications for which we are developing, or may in the future develop , Haduvio, or if the scope of the patent protection is not sufficiently broad, competitors could develop and commercialize products similar or identical to such product candidate, and our ability to successfully commercialize such product candidate may be adversely affected.

Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to Haduvio and any future product candidates, and their use for indications for which we are developing, or may develop, them in the future.

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Patent and Trademark Office, or USPTO, or to other patent offices around the world.

Alternatively or additionally, we may become involved in post-grant review procedures, oppositions, derivation proceedings, reexaminations, inter partes review or interference proceedings, in the United States or other countries, challenging patents or patent applications in which we have rights, including patents on which we rely to protect

our business.

An adverse determination in any such challenge may result in loss of exclusivi ty or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical products or product candidates, or limit the duration of the pate nt protection of Haduvio or any future product candidates of ours.

In addition, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortl y after such candidates are commercialized.

Furthermore, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual propert y to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own.

An adverse determination in any such challenge may result in loss of exclusivity or in patent claims being narrowed,

invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical products or product candidates, or limit the duration of the patent protection of Haduvio or any future product candidates of ours.

Furthermore, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own.

As a result, the inventorship or ownership of our intellectual property may be challenged in the future.

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In any patent infringement proceeding, there is a risk that a court will decide that one of our patents is invalid or unenforceable, in whole or in part, and that we do not have the right to stop the other party from using the invention at issue.

There is also a risk that, even if the validity of such patents is upheld, the court will construe the patent’s claims narrowly or decide that we do not have the right to stop the other party from using the invention at issue on the grounds that our patent claims do not cover the invention.

There is also a risk that, even if the validity of such patents is upheld, the court will construe the patent’s claims narrowly or decide

that we do not have the right to stop the other party from using the invention at issue on the grounds that our patent claims do not cover the invention.

An adverse outcome in a litigation or proceeding involving one or more of our patents could limit our ability to assert those patents against those parties or other competitors, and may curtail or preclude our ability to exclude third parties from making and selling similar or competitive products.

Similarly, if we assert trademark infringement claims, a court ma y determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question.

Similarly, if we assert trademark infringement claims, a court may determine that the marks we have asserted are invalid or unenforceable, or that the party against whom we have asserted trademark infringement has superior rights to the marks in question.

In this case, we could ultimately be forced to cease use of such trademarks.

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If the FDA does not conclude that Haduvio for the treatment of pruritus associated with prurigo nodularis or any other development program satisfies the requirements under Section 505(b)(2) of the FDCA, or Section 505(b)(2), or if the requirements for such programs are not as we expect, the approval pathway for these programs will likely take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and in any case may not be successful.

We commenced our Phase 2b/3 PRISM trial of Haduvio for the treatment of pruritus associated with prurigo nodularis and expect to conduct an additional Phase 3 clinical trial of Haduvio for the treatment of pruritus associated with prurigo nodularis under the FDA’s Section 505(b)(2) regulatory pathway.

We commenced our Phase 2b/3 PRISM trial of Haduvio for the treatment of pruritus associated with prurigo nodularis and we believe we will need to conduct an additional Phase 3 clinical trial of Haduvio for the treatment of pruritus associated with prurigo nodularis under the FDA’s Section 505(b)(2) regulatory pathway.

The Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Act, added Section 505(b)(2) to the FDCA.

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Moreover, even if our product candidates are approved under the Section 505(b)(2) pathway, the approval may be subject to limitations on the indicated uses for which the products may be marketed or to other conditions of approval, or may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the products.

Even if we complete the necessary preclinical s tudies and clinical trials, the regulatory approval process is expensive, time consuming and uncertain and may prevent us from obtaining approvals for the commercialization of Haduvio or any future product candidate.

Even if we complete the necessary preclinical studies and clinical trials, the regulatory approval process is expensive, time consuming and uncertain and may prevent us from obtaining approvals for the commercialization of Haduvio or any future product candidate.

As a result, we cannot predict when or if, and in which territories, we will obtain marketing approval to commercialize a product candidate.

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Any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approved product not commercially viable.

Finally, disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed or approved by necessary government agencies, which would adversely affect our business.

For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S.

government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical employees and stop critical activities.

If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

In response to the COVID-19 pandemic, on March 10, 2020, the FDA announced its intention to postpone most inspections of foreign manufacturing facilities, and on March 18, 2020, the FDA temporarily postponed routine surveillance inspections of domestic manufacturing facilities.

Subsequently, on July 10, 2020, the FDA announced its intention to resume certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system.

The FDA intends to use this risk-based assessment system to identify the categories of regulatory activity that can occur within a given geographic area, ranging from mission critical inspections to resumption of all regulatory activities.

Regulatory authorities outside the United States may also impose similar restrictions or other policy measures in response to the COVID-19 pandemic.

If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

Any delay in obtaining or failure to obtain required approvals and clearances could negatively impact our ability to generate revenue from the particular product candidate, which likely would result in significant harm to our financial position and adversely impact our stock price.

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regulatory requirements, our target markets will be reduced and our ability to realize the full market potential of Haduvio or any future product candidate will be harmed and our business, financial condition, results of operations and prospects may be adversely affected.

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

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

Under the withdrawal agreement, there is a transitional period until December 31, 2020.

Discussions between the United Kingdom and the European Union have so far mainly focused on finalizing withdrawal issues and transition agreements but have been extremely difficult to date.

To date, only an outline of a trade agreement has been reached.

Much remains open and if no trade agreement has been reached before the end of the transitional period, there may be significant market and economic disruption.

Since the regulatory framework for pharmaceutical products in the United Kingdom covering quality, safety, and efficacy of pharmaceutical products, clinical trials, marketing authorization, commercial sales, and distribution of pharmaceutical products is derived from European Union directives and regulations, Brexit could materially impact the future regulatory regime that applies to products and the approval of product candidates in the United Kingdom.

Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, may force us to restrict or delay efforts to seek regulatory approval in the United Kingdom for our product candidates, which could significantly and materially harm our business.

Additionally, we could face heightened risks with respect to seeking marketing approval in the United Kingdom as a result of the recent withdrawal of the United Kingdom from the European Union, commonly referred to as Brexit.

The United Kingdom and European Union entered into a Trade and Cooperation Agreement in connection with Brexit that sets out certain procedures for approval and recognition of medical products in each jurisdiction.

Since the regulatory framework for pharmaceutical products in the United Kingdom covering the quality, safety, and efficacy of pharmaceutical products, clinical trials, marketing authorization, commercial sales, and distribution of pharmaceutical products is derived from European Union directives and regulations, Brexit could materially impact the future regulatory regime that applies to products and the approval of product candidates in the United Kingdom.

Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of the Trade and Cooperation Agreement would prevent us from commercializing any product candidates in the United Kingdom and/or the European Union and restrict our ability to generate revenue and achieve and sustain profitability.

If any of these outcomes occur, we may be forced to restrict or delay efforts to seek regulatory approval in the United Kingdom and/or European Union for any product candidates, or incur additional costs, which could significantly and materially harm our business.

We expect that we will be subject to additional risks in commercializing any of our product candidates that receive marketing approval outside the United States, including tariffs, trade barriers and regulatory requirements;

economic weakness, including inflation, or political instability in particular foreign economies and markets;

compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country;

and workforce uncertainty in countries where labor unrest is more common than in the United States.

A fast track designation, grant of priority review status or breakthrough therapy status by the FDA is not assured and, in any event, may not actually lead to a faster development or regulatory review or approval process and, moreover, would not assure FDA approval of Haduvio or any future product candidate.

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The FDA has broad discretion whether or not to grant these designations, so even if we believe a particular product candidate is eligible for such designation or status, the FDA could decide not to grant it.

Moreover, even if we do receive such a designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures and there is no assurance that the product candidate will be approved by the FDA.

Even if we obtain marketing approvals for a product, the terms of approvals and ongoing regulation of such product may lim it how we manufacture and market the product, which could impair our ability to generate revenue.

We have received fast track designation for Haduvio for the proposed indication of reduction of moderate to severe pruritus in patients with prurigo nodularis, however this designation, or any future fast track, priority review or breakthrough therapy status designation, may not result in our experiencing a faster development process, review or approval compared to conventional FDA procedures and there is no assurance that the product candidate will be approved by the FDA.

Even if we obtain marketing approvals for a product, the terms of approvals and ongoing regulation of such product may limit how we manufacture and market the product, which could impair our ability to generate revenue.

Once marketing approval has been granted, an approved product and its manufacturer and marketer are subject to ongoing review and extensive regulation.

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Accordingly, assuming we receive marketing approval for one or more products, we and our contract manufacturers will continue to expend time, money and effort in a number of areas of regulatory compliance, including manufacturing, production, product surveillance and quality control.

If we are not able to comply with post-approval regulatory requirements, we could have the marketing approvals for any products withdrawn by regulatory authorities and our ability to market any future products could be limited, which could adversely affect our ability to achieve or sustain profitability.

Further, the cost of compliance with post-approval regulations may have a negative effect on our operating results and financial condition.

We expect that any regulatory approval to market Haduvio in the United States will be limited by indication.

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In recent years, a significant number of pharmaceutical and biotechnology companies have been the target of inquiries and investigations by various federal and state regulatory, investigative, prosecutorial and administrative entities in connection with the promotion of products for unapproved uses and other sales practices, including the Department of Justice and various U.S.

Attorneys’ Offices, the Office of Inspector General of the Department of Health and Human Services, the FDA, the Federal Trade Commission and various state Attorneys General offices.

Attorneys’ Offices, the Office of Inspector General of the Department of Health and Human Services, the FDA, the Federal Trade Commission

and various state Attorneys General offices.

These investigations have alleged violations of various federal and state laws and regulations, including claims asserting antitrust violations, violations of the FDCA, the False Claims Act, the Prescription Drug Marketing Act and anti-kickback laws, and other alleged violations in connection with the promotion of products for unapproved uses, pricing and Medicare and/or Medicaid reimbursement.

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If it declines, the individual may pursue the case alone.

If the FDA or any other governmental agency initiates an enforcement action against us or if we are the subject of a qui tam suit and it is determined that we violated prohibitions rela ting to the promotion of products for unapproved uses, we could be subject to substantial civil or criminal fines or damage awards and other sanctions such as consent decrees and corporate integrity agreements pursuant to which our activities would be subj ect to ongoing scrutiny and monitoring to ensure compliance with applicable laws and regulations.

If the FDA or any other governmental agency initiates an enforcement action against us or if we are the subject of a qui tam suit and it is determined that we violated prohibitions relating to the promotion of products for unapproved uses, we could be subject to substantial civil or criminal fines or damage awards and other sanctions such as consent decrees and corporate integrity agreements pursuant to which our activities would be subject to ongoing scrutiny and monitoring to ensure compliance with applicable laws and regulations.

Any such fines, awards or other sanctions would have an adverse effect on our revenue, business, financial prospects and reputation.

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The FDA and other agencies, including the Department of Justice, closely regulate and monitor the post-approval marketing and promotion of products to ensure that they are manufactured, marketed and distributed only for the approved indications and in accordance with the provisions of the approved labeling.

The FDA imposes stringent restrictions on manufacturers’ communications regarding off-label use and if we do not market any product for which we receive marketing approval for only its approved indications, we may be subject to warnings or enforcement action for off-label marketing.

The FDA imposes stringent restrictions on manufacturers’ communications regarding off-label use and if we market any product for an indication that is not approved, we may be subject to

warnings or enforcement action for off-label marketing.

Violation of the FDCA and other statutes, including the False Claims Act, relating to the promotion and advertising of prescription drugs may lead to investigations or allegations of violations of federal and state health care fraud and abuse laws and state consumer protection laws.

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injunctions or the imposition of civil or criminal penalties.

Under the 21st Century Cures Act and regulatory reform initiatives of the current presidential administration, the FDA’s policies, regulations and guidance may be revised or revoked, which could prevent, limit or delay regulatory approval of Haduvio or any future product candidate, impacting our ability to generate revenue.

In December 2016, the 21st Century Cures Act, or Cures Act, was signed into law.

The Cures Act, among other things, is intended to modernize the regulation of drugs and spur innovation, but its ultimate implementation is unclear.

If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.

We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or other countries.

For example, certain policies of the current presidential administration may impact our business and industry.

Namely, the current presidential administration has taken several executive actions, including the issuance of a number of executive orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications.

An under-resourced FDA could result in delays in the FDA’s responsiveness or in its ability to review submissions or applications, issue regulations or guidance, or implement or enforce regulatory requirements in a timely fashion or at all.

In January 2017, the President issued an executive order applicable to all executive agencies, including the FDA, which required that for each notice of proposed rulemaking or final regulation to be issued in fiscal year 2017, the agency shall have identified at least two existing regulations to be repealed, unless prohibited by law.

These requirements are referred to as the “two-for-one” provisions.

This executive order includes a budget neutrality provision that required the total incremental cost of all new regulations in the 2017 fiscal year, including repealed regulations, to be no greater than zero, except in limited circumstances.

For fiscal years 2018 and beyond, the executive order requires agencies to identify regulations to offset any incremental cost of a new regulation and approximate the total costs or savings associated with each new regulation or repealed regulation.

In interim guidance issued by the Office of Information and Regulatory Affairs within the Office of Management and Budget in February 2017, the administration indicates that the “two-for-one” provisions may apply not only to agency regulations, but also to significant agency guidance documents.

In addition, on February 24, 2017, the President issued an executive order directing each affected agency to designate an agency official as a “Regulatory Reform Officer” and establish a “Regulatory Reform Task Force” to implement the two-for-one provisions and other previously issued executive orders relating to the review of federal regulations.

More recently, on October 9, 2019, the President issued another executive order (“Executive Order on Promoting the Rule of Law Through Improved Agency Guidance Documents”).

The order is meant to ensure that agency guidance documents do not establish legally binding requirements and it directs each agency to rescind guidance documents that it determines should no longer be in effect.

It is difficult to predict how these various requirements will be implemented, and the extent to which they will impact the FDA’s ability to exercise its regulatory authority.

If these executive actions impose constraints on the FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.

Current and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize Haduvio or any future product candidate and may affect the prices we may obtain.

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

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

Among the provisions of the ACA of potential importance to our business and Haduvio or any future product candidate are the following:

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

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

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

a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% point-of-sale discounts off negotiated prices;

extension of manufacturers’ Medicaid rebate liability;

expansion of eligibility criteria for Medicaid programs;

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

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

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

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

If reimbursement of our products is unavailable or limited in scope, our business could be materially harmed.

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

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

These changes include the Budget Control Act of 2011, which, among other things, led to aggregate reductions to Medicare payments to providers of up to 2% per fiscal year that started in 2013 and, due to subsequent legislative amendments to the statute, will stay in effect through 2027 unless additional congressional action is taken.

The CARES Act suspended the 2% Medicare sequester from May 1, 2020 through December 31, 2020, and extended the sequester by one year, through 2030.

The American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several types of providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

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

In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress.

A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs.

These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013 and will remain in effect through 2030 under the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act.

The American Taxpayer Relief Act of 2012, 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.

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

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

For example, with enactment of the Tax Cuts for Jobs Act, or TCJA, in 2017, Congress repealed the “individual mandate.” The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, became effective in 2019.

Further, on December 14, 2018, a United States District Court judge in the Northern District of Texas ruled that the individual mandate portion of the ACA is an essential and inseverable feature of the ACA, and therefore because the mandate was repealed as part of the TCJA, the remaining provisions of the ACA are invalid as well.

The United States Supreme Court heard this case on November 10, 2020, and a ruling by the Court is expected sometime this year.

Pending resolution of the litigation, all of the provisions in the ACA but the individual mandate to buy health insurance remains in effect.

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

The Trump Administration also took executive actions to undermine or delay implementation of the ACA, including directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers or manufacturers of pharmaceuticals or medical devices.

On January 28, 2021, however, President Biden revoked those Orders and issued a new Executive Order which directs federal agencies to reconsider rules and other policies that limit Americans’ access to health care, and consider actions that will protect and strengthen that access.

Under this Order, federal agencies are directed to re-examine:

policies that undermine protections for people with pre-existing conditions, including complications related to COVID-19;

demonstrations and waivers under Medicaid and the ACA that may reduce coverage or undermine the programs, including work requirements;

policies that undermine the Health Insurance Marketplace or other markets for health insurance;

policies that make it more difficult to enroll in Medicaid and the ACA;

and policies that reduce affordability of coverage or financial assistance, including for dependents.

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

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Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors.

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

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

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

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

The current presidential administration has also taken executive actions to undermine or delay implementation of the ACA.

Since January 2017, the President has signed two Executive Orders designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA.

One Executive Order directs federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices The second Executive Order terminates the cost-sharing subsidies that reimburse insurers under the ACA.

Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017.

Further, on June 14, 2018, the U.S.

Court of Appeals for the Federal Circuit ruled that the federal government was not required to pay more than $12 billion in ACA risk corridor payments to third-party payors who argued were owed to them.

On April 27, 2020, however, the U.S.

Supreme Court reversed the federal circuit decision upholding Congress’ denial of such risk corridor funding .

In addition, Centers for Medicare & Medicaid Services, or CMS, has recently proposed regulations that would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces.

In addition, on December 14, 2018, a U.S.

District Court judge in the Northern District of Texas ruled that the individual mandate portion of the ACA is an essential and inseverable feature of the ACA, and therefore because the mandate was repealed as part of the Tax Cuts and Jobs Act, the remaining provisions of the ACA are invalid as well.

The current presidential administration and CMS have both stated that the ruling will have no immediate effect, and on December 30, 2018 the same judge issued an order staying the judgment pending appeal.

The current presidential administration recently represented to the Court of Appeals considering

this judgment that it does not oppose the lower court’s ruling.

On July 10, 2019, the Court of Appeals for the Fifth Circuit heard oral argument in this ca se.

On December 18, 2019, that court affirmed the lower court’s ruling that the individual mandate portion of the ACA is unconstitutional and it remanded the case to the district court for reconsideration of the severability question and additional analys is of the provisions of the ACA.

On March 3 , 2020, the U.S.

Supreme Court agreed to review this decision .

On June 25, 2020, the current presidential administration and a coalition of 18 states asked the court to strike down the entirety of the ACA.

Oral argument in this case took place on November 10, 2020.

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

We plan to continue to evaluate the effect that the ACA and its possible repeal and replac ement could have on our business.

It is possible that repeal and replacement initiatives, if enacted into law, could ultimately result in fewer individuals having health insurance coverage or in individuals having insurance coverage with less generous bene fits.

While the timing and scope of any potential future legislation to repeal and replace ACA provisions is uncertain in many respects, it is also possible that some of the ACA provisions that generally are not favorable for the research-based pharmaceuti cal industry could also be repealed along with ACA coverage expansion provisions.

Accordingly, such reforms, if enacted, could have an adverse effect on anticipated revenue from product candidates that we may successfully develop and for which we may obtai n marketing approval and may affect our overall financial condition and ability to develop commercialize product candidates.

Further, 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, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products.

At the federal level, the current presidential administration has pressed for further drug price control measures to be enacted in future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients.

Any proposed measures will require authorization through additional legislation to become effective, and Congress and the current presidential administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs.

It is unclear, however, whether the Congress and administration will be able to reach agreement on any such measures in the foreseeable future.

In addition, on May 11, 2018, the current presidential administration issued a plan to lower drug prices.

Under this blueprint for action, the current presidential administration indicated that the Department of Health and Human Services will take steps to end the gaming of regulatory and patent processes by drug makers to unfairly protect monopolies;

advance biosimilars and generics to boost price competition;

evaluate the inclusion of prices in drug makers’ advertisements to enhance price competition;

speed access to and lower the cost of new drugs by clarifying policies for sharing information between insurers and drug makers;

avoid excessive pricing by relying more on value-based pricing by expanding outcome-based payments in Medicare and Medicaid;

work to give Part D plan sponsors more negotiation power with drug makers;

examine which Medicare Part B drugs could be negotiated for a lower price by Part D plans, and improve the design of the Part B Competitive Acquisition Program;

update Medicare’s drug-pricing dashboard to increase transparency;

prohibit Part D contracts that include “gag rules” that prevent pharmacists from informing patients when they could pay less out-of-pocket by not using insurance;

and require that Part D plan members be provided with an annual statement of plan payments, out-of-pocket spending and drug price increases.

Additionally, on September 24, 2020, the FDA finalized a rulemaking that allows states or certain other non-federal government entities to submit importation program proposals to the FDA for review and approval.

Accordingly, such reforms, if enacted, could have an adverse effect on anticipated revenue from product candidates that we may successfully develop and for which we may obtain marketing approval and may affect our overall financial condition and ability to develop or commercialize product candidates.

Current and future legislative efforts may limit the prices for our products, if and when they are licensed for marketing, and that could materially impact our ability to generate revenues.

The prices of prescription pharmaceuticals have also been the subject of considerable discussion in the United States.

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

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

For example, on September 24, 2020, the Trump Administration finalized a rulemaking allowing states or certain other non-federal government entities to submit importation program proposals to the FDA for review and approval.

Applicants are required to demonstrate that their importation plans pose no additional risk to public health and safety and will result in significant cost savings for consumers.

The FDA has issued draft guidance that would allow manufacturers to import their own FDA-approved drugs that are authorized for sale in other countries (multi-market approved products).

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

The President also recently issued several executive orders that are intended to lower the costs of prescription drug products.

These orders direct the federal government to implement the initiatives outlined in the orders, meaning they will not have immediate effects .

At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

In addition, regional health care authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs.

These measures could reduce the ultimate demand for our products, if approved, or put pressure on our product pricing.

Moreover, legislative and regulatory proposals have also been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical drugs.

We cannot be sure whether additional legislative changes will be enacted, or whether FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our drug candidates, if any, may be.

In addition, increased scrutiny by the Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us and any collaborators to more stringent drug labeling and post-marketing testing and other requirements.

Any relationships we may have with customers, healthcare providers and professionals, and third-party payors, among others, will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to penalties, including criminal sanctions, civil penalties, contractual damages, reputational harm, fines, disgorgement, exclusion from participation in government healthcare programs, curtailment or restricting of our operations, an d diminished profits and future earnings.

In addition, President Trump issued several executive orders intended to lower the costs of prescription drug products.

Certain of these orders are reflected in recently promulgated regulations, including an interim final rule implementing President Trump’s most favored nation model, but such final rule is currently subject to a nationwide preliminary injunction.

The Biden Administration has frozen certain of the previous administration’s measures to reform drug prices, pending further review.

It remains to be seen how the Biden Administration will address this issue but, under Medicare Part D, the new administration may seek to establish a ceiling for the launch prices of all branded, biologic, and certain generic drugs by referencing the average price of these drugs in other developed countries.

At the same time, the administration may seek to limit Medicare Part D and public option drug prices through a tax penalty on manufacturers for increases in the cost of drugs and biologics above the general inflation rate.

The American Rescue Plan Act of 2021, comprehensive COVID-19 relief legislation recently enacted under the Biden administration, includes a number of healthcare-related provisions, such as support to rural health care providers, increased tax subsidies for health insurance purchased through insurance exchange marketplaces, financial incentives to states to expand Medicaid programs and elimination of the Medicaid drug rebate cap effective in 2024.

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.

In addition, regional health care organizations and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs.

These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing.

We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.

In the European Union, similar political, economic and regulatory developments may affect our ability to profitably commercialize our product candidates, if approved.

In markets outside of the United States and the European Union, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies.

In many countries, including those of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control and access.

In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product.

To obtain reimbursement or pricing approval in some countries, we or our collaborators may be required to conduct a clinical trial that compares the cost-effectiveness of our product to other available therapies.

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

Healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of any products for which we are able to obtain marketing approval.

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The provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products is also prohibited in the European Union.

The provision of benefits or advantag es to physicians is governed by the national anti-bribery laws of European Union Member States, such as the U.K.

The provision of benefits or advantages to physicians is governed by the national anti-bribery laws of European Union Member States, such as the U.K.

Bribery Act 2010.

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In addition, the FCPA presents particular challenges in the pharmaceutical industry because in many countries, hospitals are operated by the government, and doctors and other hospital employees are considered foreign officials.

Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and hav e led to FCPA enforcement actions.

Certain payments to hospitals in connection with clinical trials and other work have been deemed to be improper payments to government officials and have led to FCPA enforcement actions.

Various laws, regulations and executive orders also restrict the use and dissemination outside of the United States, or the sharing with certain non-U.S.

nationals, of information classified for national security purposes, as well as certain products and technical data relating to those products.

Further, the provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order, or use of medicinal products is prohibited in the European Union.

The provision of benefits or advantages to physicians is also governed by the national anti-bribery laws of European Union Member States, such as the U.K.

Bribery Act 2010.

Infringement of these laws could result in substantial fines and imprisonment.

Payments made to physicians in certain European Union Member States must be publicly disclosed.

Moreover, agreements with physicians often must be the subject of prior notification and approval by the physician’s employer, his or her competent professional organization, and/or the regulatory authorities of the individual European Union Member States.

These requirements are provided in the national laws,

industry codes, or professional codes of conduct applicable in the European Union Member States.

Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines, or imprisonment.

If we expand our presence outside of the United States, it will require us to dedicate additional resources to comply with these laws, and these laws may preclude us from developing, manufacturing or selling certain products and product candidates outside of the United States, which could limit our growth potential and increase our development costs.

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In addition, failure to comply with these laws and regulations may result in substantial fines, penalties or other sanctions.

Governments outside the United States tend to impose strict price controls, which may adversely affect our revenues, if any.

In some countries, such as the countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control.

In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product.

To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of a product to other available therapies.

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

Our business and operations would suffer in the event of system failures.

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The secure processing, maintenance and transmission of this information is critical to our operations.

Despite our security measures,

our information technology and infrastructure may be vulnerable to attacks by hackers or internal bad actors, or breached due to employee error, a technical vulne rability, malfeasance or other disruptions.

Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or internal bad actors, or breached due to employee error, a technical vulnerability, malfeasance or other disruptions.

Although, to our knowledge, we have not experienced any such material security breach to date, any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen.

Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information and significant regulatory penalties, and such an event could disru pt our operations, damage our reputation, and cause a loss of confidence in us and our ability to conduct clinical trials, which could adversely affect our reputation and delay our clinical development of our product candidates.

Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information and significant regulatory penalties, and such an event could disrupt our operations, damage our reputation, and cause a loss of confidence in us and our ability to conduct clinical trials, which could adversely affect our reputation and delay our clinical development of our product candidates.

Risks Related to Employee Matters and Managing our Growth

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Thomas Sciascia, M.D., our Chief Medical Officer;

and Helena Brett-Smith, M.D., our Chief Development Officer;

and William Forbes, Pharm.

D., our Chief Development Officer;

as well as the other principal members of our management and scientific teams.

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Sciascia, these agreements do not prevent them from terminating their employment with us at any time.

Except as otherwise required by law, all of the members of our executive team are employed “at will,” meaning that they may terminate their employment with us at any time with or without notice and for any reason or no reason.

Except as otherwise required by law, all of

the members of our executive team are employed “at will,” meaning that they may terminate their employment with us at any time with or without notice and for any reason or no reason.

The loss of the services of any of these persons could impede the achievement of our research, development and commercialization objectives.

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We expect to expand our organization, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

As of September 30, 2020 we had 22 employees .

As of March 31, 2021, we had 23 employees.

We expect to experience significant growth in the number of our employees and the scope of our operations.

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regulatory authorities, to provide accurate information to the FDA or comparable non-U.S.

regulatory authorities, to comply with manufacturing

stan dards we have established, to comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable non-U.S.

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

regulatory authorities, to comply with manufacturing standards we have established, to comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable non-U.S.

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

Such misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation.

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

If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant criminal, civil and administrative sanctions including monetary penalties, damages, fines, disgorgement, individual imprisonment, exclusion from participation in gove rnment funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, reputat ional harm and requirements to curtail or restructure our operations.

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

If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant criminal, civil and administrative sanctions including monetary penalties, damages, fines, disgorgement, individual imprisonment, exclusion from participation in government funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, reputational harm and requirements to curtail or restructure our operations.

Risks Related to Our Common Stock

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variations in our financial results or those of companies that are perceived to be similar to us;

recomme ndations and changes in estimates or recommendations by securities analysts, if any, that cover our stock;

recommendations and changes in estimates or recommendations by securities analysts, if any, that cover our stock;

changes in the structure of healthcare payment systems in the United States and other countries;

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general economic, industry and market conditions, including recent adverse changes in the domestic and international financial markets, and the impacts of the COVID-19 pandemic;

our ability to continue as a going concern;

other factors and considerations described in this “Risk Factors” section.

In addition, the novel coronavirus has been spreading rapidly around the world since December 2019 and has negatively affected the stock market and investor sentiment.

In addition, the COVID-19 pandemic has negatively affected the stock market and investor sentiment.

The price and volatility of our common stock may be disproportionately affected as investors may favor traditional profit-making industries and companies during the times of market uncertainty and instability.

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In June 2020, we entered into the ATM Sales Agreement, pursuant to which, from time to time, we may offer and sell under the ATM Sales Agreement up to $12.0 million of the common stock registered under the Shelf Registration Statement pursuant to one or more “at the market” offerings.

As of September 30, 2020, we had sold 466,758 shares of common stock pursuant to the ATM Sales Agreement.

As of March 31, 2021, we had sold 2,055,497 shares of common stock for an aggregate purchase price of $7.6 million pursuant to the ATM Sales Agreement.

The extent to which we utilize the ATM Sales Agreement as a source of funding will depend on a number of factors, including the prevailing market price of our common stock, general market conditions, and the extent to which we are able to secure funds from other sources.

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Ownership of our common stock is concentrated among our executive officers and directors and their affiliates and our significant stockholders, who have significant influence over our business, which may prevent new investors from influencing significant corporate decisions.

Our executive officers and directors and their affiliates and our significant stockholders in the aggregate, beneficially own shares representing approximately 71.2% of our common stock as of November 11, 2020.

Our executive officers and directors and their affiliates and our significant stockholders in the aggregate, beneficially own shares representing approximately 60.0% of our common stock as of May 12, 2021.

As a result, our executive officers and directors and their affiliates and our significant stockholders acting together would be able to control all matters submitted to our stockholders for approval, as well as our management and affairs.

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The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the Nasdaq Stock Market and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices.

need to hire additional accounting, finance and other personnel in connection with our efforts to comply with the requirements of being a public company and our management and other personnel will need to devote a substantial amount o f time in complying with these requirements, which could negatively impact our financial results.

We may need to hire additional accounting, finance and other personnel in connection with our efforts to comply with the requirements of being a public company and our management and other personnel will need to devote a substantial amount of time in complying with these requirements, which could negatively impact our financial results.

Current and changing laws, rules and regulations relating to corporate governance and public disclosure may increase our legal and financial compliance costs and make some activities more time-consuming and costly.

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We are evaluating these rules and regulations and cannot currently predict or estimate the additional costs we may incur or the timing of such costs.

In addition, these laws, rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new gui dance is provided by regulatory and governing bodies.

In addition, these laws, rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies.

This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

We intend to invest resources to compl y with evolving laws, rules and regulations, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities.

We intend to invest resources to comply with evolving laws, rules and regulations, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities.

If, notwithstanding our efforts to comply with new laws, rules and regulations, we fail to comply, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

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The Sarbanes-Oxley Act of 2002 requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting.

Pursuant to SOX Section 404, we will be required to furnish a report by our management on our internal control over financial reporting beginning with our Annual Report on Form 10-K for our fiscal year ending December 31, 2020.

However, while we remain an emerging growth company or a smaller reporting company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.

Pursuant to SOX Section 404, we are required to furnish annual reports by our management on our internal control over financial reporting.

However, while we remain an emerging growth company or a smaller reporting company with less than $100 million in annual revenue, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.

To achieve compliance with SOX Section 404 within the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both costly and challenging.

In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control processes as appropriate, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting.

We have never been required to test our internal control within a specified period and despite our efforts, there is a risk that we will not be able to conclude, within the prescribed timeframe or at all, that our internal control over financial reporting is effective.

Despite our efforts, there is a risk that we will not be able to conclude that our internal control over financial reporting is effective.

If we are unable to comply with the requirements of SOX Section 404 in a timely manner, or if we are unable to maintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements.

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As of December 31, 2020, we had federal and state net operating loss carryforwards of $137.6 million, and federal research and development tax credit carryforwards of $3.9 million, which if not utilized generally will begin to expire in 2031 and 2032 , respectively.

These net operating loss a nd tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities.

These net operating loss and tax credit carryforwards could expire unused and be unavailable to offset future income tax liabilities.

In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, and corresponding provisions of state law, a corporation that undergoes an “ownership change,” generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three year period, is subject to limitations on its ability to utilize its pre-change net operating losses and research and development tax credit carryforwards to offset future taxable income.

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If we determine that an ownership change occurs and our ability to use our historical net operating loss and tax credit carryforwards is materially limited, or if our research and development tax credit carryforwards are adjusted, it would harm our future operating results by effectively increasing our future tax obligations.

There is also a risk that due to regulatory changes, such as suspensions on the use of net operating losses, or other unforeseen reasons, our existing net operating losses could ex pire or otherwise become unavailable to offset future income tax liabilities.

There is also a risk that due to regulatory changes, such as suspensions on the use of net operating losses, or other unforeseen reasons, our existing net operating losses could expire or otherwise become unavailable to offset future income tax liabilities.

As described below in “Changes in tax laws or in their implementation or interpretation may adversely affect our business and financial condition,” the Tax Cuts and Jobs Act, or the Tax Act, as amended by the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, includes changes to U.S.

federal tax rates and the rules governing net operating loss carryforwards that may significantly impact our ability to utilize our n et operating losses to offset taxable income in the future.

federal tax rates and the rules governing net operating loss carryforwards that may significantly impact our ability to utilize our net operating losses to offset taxable income in the future.

In addition, state net operating losses generated in one state cannot be used to offset income generated in another state.

For these reasons, even if we attain profitability, we may be unable to u se a material portion of our net operating losses and other tax attributes.

For these reasons, even if we attain profitability, we may be unable to use a material portion of our net operating losses and other tax attributes.

Changes in tax laws or in their implementation or interpretation may adversely affect our business and financial condition.

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

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

On December 22, 2017, the U.S.

government enacted the Tax Act, which significantly reformed the Code.

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

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

rates regardless of whether they are repatriated, the elimination of U.S.

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

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

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

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

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

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors