What changed in this filing

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Item 1A. Risk Factors

2022-08-11 compared with 2022-05-12 · 167 added, 164 removed, 1273 unchanged (21% of the section changed)

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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 $7.3 million and $33.9 million for the three months ended March 31, 2022 and for the year ended December 31, 2021, respectively.

As of March 31, 2022, we had an accumulated deficit of $188.2 million.

Our net losses were $15.4 million and $33.9 million for the six months ended June 30, 2022 and for the year ended December 31, 2021, respectively.

As of June 30, 2022, we had an accumulated deficit of $196.3 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, or IPO, borrowings under our prior term loan facility, proceeds from our IPO 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, the term loan facility with Silicon Valley Bank that we entered into in August 2020, which we refer to as the SVB Term Loan, proceeds from the two private placements we completed in October 2021, or the October 2021 Private Placements, proceeds from the private placement we completed in April 2022, or the April 2022 Private Placement, and proceeds from the exercise of common stock warrants that were issued in the October 2021 Private Placements.

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

We have devoted substantially all of our financial resources and

efforts to the clinical development of our product candidate Haduvio and related activities.

Our net losses may fluctuate significantly from quarter to quarter and year to year.

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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 PRISM trial and our ongoing Phase 2 CANAL trial and subsequent trials in each indication;

complete other development work required for the filing of a NDA with the FDA, and the filing of marketing authorization applications, or MAAs, with the EMA and the MHRA, 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 and our continued development work in chronic cough in IPF;

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

continue to develop and conduct clinical trials of Haduvio, including the ongoing open-label extension portion of our Phase 2b/3 PRISM trial, our Phase 2 CANAL trial and subsequent trials;

complete other development work required for the filing of a NDA with the FDA, and the filing of marketing authorization applications, or MAAs, with the EMA and the MHRA, for Haduvio for the treatment of prurigo nodularis, including completing the open-label extension portion of our Phase 2b/3 PRISM trial and at least one additional Phase 3 clinical trial in this indication and our continued development work in chronic cough in adults with IPF;

seek regulatory and marketing approvals for Haduvio for the treatment of prurigo nodularis and/or chronic cough in adults with IPF or for other serious neurologically mediated conditions or for any future product candidate that successfully completes clinical trials, if any;

negotiate and execute pediatric development plans and complete any post-approval commitments;

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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.

For example, in order to successfully commercialize Haduvio for the treatment of prurigo nodularis, we will be required, at a minimum, to successfully complete the ongoing open-label extension portion of our 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.

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Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by clinical-stage biopharmaceutical companies such as ours.

Any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing pharmaceutical products.

Any predictions you make about our future success or

viability may not be as accurate as they could be if we had a longer operating history or a history of successfully developing and commercializing pharmaceutical products.

We may encounter unforeseen expenses, difficulties, complications, delays and other known or unknown factors in achieving our business objectives.

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We have consumed substantial amounts of cash since our inception.

For example, in the three months ended March 31, 2022 and the year ended December 31, 2021, we used net cash of $7.1 million and $28.9 million, respectively, in our operating activities, substantially all of which related to development activities for Haduvio.

As of March 31, 2022, our cash and cash equivalents were $29.1 million.

In April 2022, we closed the April 2022 Private Placement with gross proceeds of $55.0 million.

In April 2022, we also received $4.5 million in proceeds from the exercise of common stock warrants that were issued in the October 2021 Private Placements.

For example, in the six months ended June 30, 2022 and the year ended December 31, 2021, we used net cash of $13.3 million and $28.9 million, respectively, in our operating activities, substantially all of which related to development activities for Haduvio.

As of June 30, 2022, our cash, cash equivalents and marketable securities were $78.9 million.

In July 2022, we also received $4.1 million in proceeds from the exercise of common stock warrants that were issued in the October 2021 Private Placements.

We expect our expenses to increase substantially in connection with our ongoing activities, particularly as we continue to develop Haduvio, including as we:

complete our ongoing Phase 2b/3 PRISM trial and the additional Phase 3 clinical trial we believe we will need to conduct for Haduvio for the treatment of pruritus associated with prurigo nodularis

complete our Phase 2 CANAL trial and begin the next trial we plan to conduct for Haduvio for the treatment of chronic cough in adults with IPF, which we expect will be designed as a Phase 2b/3 trial, subject to discussions with the FDA;

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.

complete the open-label extension portion of our ongoing Phase 2b/3 PRISM trial;

complete our Phase 2 CANAL trial and, if the CANAL trial is successful, conduct the next trial we plan to conduct for Haduvio for the treatment of chronic cough in adults with IPF, which we expect will be designed as a Phase 2b/3 trial, subject to discussions with the FDA;

In addition, we may incur additional expenses:

if we determine to conduct an additional clinical trial for the treatment of prurigo nodularis;

if we 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;

as a result of the COVID-19 pandemic and resulting clinical trial delays and interruptions.

In addition, if we obtain marketing approval for Haduvio or any future product candidate, we may incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.

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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, for the treatment of chronic cough in adults with IPF and for working capital and other general corporate purposes.

We plan to use our existing cash, cash equivalents and marketable securities to fund the development of Haduvio and for working capital and other general corporate purposes.

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

Our existing cash and cash equivalents will not be sufficient to complete development of Haduvio for the treatment of pruritus associated with prurigo nodularis or for any other condition or of any future product candidate.

Our existing cash, cash equivalents and marketable securities will not be sufficient to complete development of Haduvio for the treatment of prurigo nodularis and chronic cough in adults with IPF or for any other condition or of any future product candidate.

We do not have any committed external source of funds.

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We indicated that there were a number of factors that raised substantial risks about our ability to continue as a going concern as of the date of our Annual Report on Form 10-K for the year ended December 31, 2021 without additional capital.

We believe that our existing cash and cash equivalents, including the proceeds from the April 2022 Private Placement as well as proceeds received from the exercise of outstanding warrants that were to expire on April 5, 2025 from the October 2021 Private Placements, will enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2024, without giving effect to the rights of SVB under the SVB Loan Agreement if we fail to receive positive data in either our Phase 2b/3 PRISM trial or our Phase 2 CANAL trial by December 31, 2022.

If we fail to achieve this condition and SVB cash collateralizes the amounts then owed to SVB under the SVB Loan Agreement or uses such amounts to prepay the SVB Term Loan, the period for which we will be able to fund our operating expenses and capital expenditure requirements will be significantly shorter however, it will be at least through 12 months from the filing date.

We have based our estimates as to how long we expect we will be able to fund our operations on assumptions that may prove to be wrong and we could use our available capital resources sooner than we currently expect, in which case we would be required to obtain additional financing.

We believe that our existing cash, cash equivalents and marketable securities, including the proceeds we received in July 2022 from the exercise of common stock warrants that were issued in the October 2021 Private Placements, will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2023.

This does not consider the cost of any additional clinical trial that we may determine to conduct for the treatment of prurigo nodularis.

obtain additional financing.

However, such a financing may not be available to us on acceptable terms, on a timely basis or at all.

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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, as well as the scope, progress, timing, costs and results of clinical trials of Haduvio for chronic cough associated with IPF and other serious neurologically mediated conditions;

the scope, progress, timing, costs and results of clinical trials of Haduvio for the treatment of prurigo nodularis, and for the treatment of chronic cough in adults with IPF and other serious neurologically mediated conditions;

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

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

the costs of commercialization activities for Haduvio for the treatment of pruritus associated with prurigo nodularis, chronic cough associated with IPF, or for any other serious neurologically mediated conditions or for any future product candidates that receive marketing approval, if any, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities;

subject to receipt of marketing approvals, revenue, if any, received from commercial sales of Haduvio for the treatment of pruritus associated with prurigo nodularis or chronic cough associated with IPF or for any other serious neurologically mediated conditions or from any future product candidates;

our ability to identify potential collaborators for Haduvio for the treatment of pruritus associated with prurigo nodularis or chronic cough associated with IPF or for any future product candidates and the terms and timing of any collaboration agreement that we may establish for the development and any commercialization of such product candidates;

the extent to which rising inflation increases the expenses related to our clinical trials;

the costs of commercialization activities for Haduvio for the treatment of prurigo nodularis, chronic cough in adults with IPF, or for any other serious neurologically mediated conditions or for any future product candidates that receive marketing approval, if any, including the costs and timing of establishing product sales, marketing, distribution and manufacturing capabilities;

subject to receipt of marketing approvals, revenue, if any, received from commercial sales of Haduvio for the treatment of prurigo nodularis or chronic cough in adults with IPF or for any other serious neurologically mediated conditions or from any future product candidates;

our ability to identify potential collaborators for Haduvio for the treatment of prurigo nodularis or chronic cough in adults with IPF or for any future product candidates and the terms and timing of any collaboration agreement that we may establish for the development and any commercialization of such product candidates;

the extent to which we acquire or in-license rights to other potential product candidates or technologies and the terms and timing of any such acquisition or licensing arrangements;

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On August 13, 2020, we entered into a Loan and Security Agreement, or the SVB Loan Agreement with Silicon Valley Bank, or SVB, pursuant to which SVB provided a term loan to us in the original principal amount of $14.0 million, or the SVB Term Loan.

In July 2021, we entered into the Loan Amendment.

In April 2022, we entered into the Third Amendment to the SVB Loan Agreement.

Following the Third Amendment, the SVB Term Loan bears interest at a floating rate per annum equal to (i) prior to raising $45.0 million in net proceeds from the sale of our equity securities, which we refer to as the 2022 Equity Event, the greater of (A) the prime rate plus 1.00% and (B) 4.25%, and (ii) upon and after the occurrence of the 2022 Equity Event, the greater of (A) the prime rate plus 3.00% and (B) 6.25%.

The closing of the April 2022 Private Placement constituted the 2022 Equity Event.

In April 2022, we entered into a Third Amendment to the SVB Loan Agreement.

Pursuant to the Third Amendment and after we received positive data in our Phase 2b/3 PRISM trial, the SVB Term Loan bears interest at a floating rate per annum equal to the greater of (A) the prime rate plus 3.00% and (B) 6.25%.

The Federal Reserve has recently raised interest rates to combat the effects of recent high inflation, and may raise interest rates further in the future.

The increase in interest rates by the Federal Reserve has caused, and could in the future continue to cause, the prime rate to increase, which has increased and could in the future further increase our

debt service obligations.

Significant increases in such obligations could have a negative impact on our financial position or operating results, including cash available for servicing our indebtedness.

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

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Our obligations under the Loan Agreement are secured by substantially all of our assets, excluding our intellectual property (which is subject to a negative pledge under the Loan Agreement).

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, under the Third Amendment, we will be required to deposit unrestricted and unencumbered cash equal to 100% of all outstanding amounts owed to SVB in a cash collateral account controlled by SVB if we do not receive positive final data by December 31, 2022 from either our ongoing Phase 2b/3 PRISM trial of Haduvio for prurigo nodularis or our Phase 2 CANAL trial of Haduvio for the treatment of chronic cough in adults with IPF.

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.

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

requiring us to dedicate a portion of our cash and cash equivalents to the payment of interest on and principal of our debt, or maintain a portion of our cash and cash equivalents in cash collateral accounts controlled by our lenders to secure repayment of our debt (which may be used by our lenders to prepay the debt if certain requirements are not met), which will reduce the amounts available to fund working capital, capital expenditures, product development efforts and other general corporate purposes;

requiring us to dedicate a portion of our cash and cash equivalents to the payment of interest on and principal of our debt, which will reduce the amounts available to fund working capital, capital expenditures, product development efforts and other general corporate purposes;

exposing us to the risk of interest rate volatility as the SVB Term Loan is subject to a floating interest rate;

obligating us to negative covenants restricting our activities, including the negative covenants to which we are subject under the SVB Loan Agreement;

limiting our flexibility in planning for or reacting to, changes in our business and our industry.

We intend to satisfy our debt service obligations with our existing cash and cash equivalents, the proceeds from the April 2022 Private Placement, proceeds from the exercise of any warrants from the October 2021 Private Placements, and any additional amounts we may raise through future debt and equity financings.

We intend to satisfy our debt service obligations with our existing cash, cash equivalents and marketable securities, proceeds from the exercise of any warrants from the October 2021 Private Placements, and any additional amounts we may raise through future debt and equity financings.

However, we may not have sufficient funds or may be unable to arrange for additional financing to pay the amounts due under our existing debt.

Funds from external sources may not be available on acceptable terms, if at all.

In addition, as discussed above, a failure to achieve positive data in either our ongoing Phase 2b/3 PRISM trial of Haduvio for prurigo nodularis or our Phase 2 CANAL trial of Haduvio for the treatment of chronic cough in adults with IPF could result in us having to deposit unrestricted and unencumbered cash equal to 100% of all outstanding amounts owed to SVB in a cash collateral account with SVB, which can be used by SVB to prepay the SVB Term Loan at any time.

Failure to pay any amount due under the SVB Loan Agreement, to comply with covenants under the SVB Loan Agreement or the occurrence of an event that would reasonably be expected to have a material adverse effect on our business, operations or condition (financial or otherwise) would result in an event of default.

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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 Phase 2b/3 PRISM trial;

the additional Phase 3 clinical trial we believe we will need to conduct for Haduvio for the treatment of pruritus associated with prurigo nodularis;

our ongoing Phase 2 CANAL trial;

the next study we plan to conduct for Haduvio for the treatment of chronic cough in adults with IPF, which we expect will be designed as a Phase 2b/3 trial, subject to discussions with the FDA;

and develop Haduvio for the treatment of other serious neurologically mediated conditions.

We expect our expenses to increase substantially in connection with our planned operations, particularly as we:

conduct the open-label extension portion of our Phase 2b/3 PRISM trial;

conduct our Phase 2 CANAL trial;

conduct the next study we plan to conduct for Haduvio for the treatment of chronic cough in adults with IPF, which we expect will be designed as a Phase 2b/3 trial, subject to discussions with the FDA;

conduct any additional Phase 3 clinical trial that we may determine to conduct for the treatment of prurigo nodularis .

Accordingly, we will be required to obtain further funding through public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources to fund these expenses.

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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 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.

In addition, further debt financing, if available, would result in additional fixed payment obligations and may involve agreements that include grants of additional security interests on our assets and additional restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures, granting liens over our assets, redeeming stock or declaring dividends, that could adversely impact our ability to conduct our business, which covenants may be more restrictive than the covenants to which we are subject under the SVB Loan Agreement.

In addition, further debt

financing, if available, would result in additional fixed payment obligations and may involve agreements that include grants of additional security interests on our assets and additional restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures, granting liens over our assets, redeeming stock or declaring dividends, that could adversely impact our ability to conduct our business, which covenants may be more restrictive than the covenants to which we are subject under the SVB Loan Agreement.

Securing financing could also require a substantial amount of time from our management and may divert a disproportionate amount of their attention away from daily activities, which may adversely affect our management’s ability to oversee the development of Haduvio or that of any future product candidates.

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We may acquire or in-license rights to other potential product candidates or technologies in the future, but we are currently not developing any other product candidates.

Our most advanced programs are the development of Haduvio for the treatment of pruritus associated with prurigo nodularis and chronic cough associated with IPF, as our efforts to develop Haduvio for other serious neurologically mediated conditions are only at an early stage.

As a result, if our efforts to develop and commercialize Haduvio for the treatment of pruritus associated with prurigo nodularis or chronic cough associated with IPF are unsuccessful or we experience significant delays in doing so, our business could also be substantially harmed.

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

successfully retaining subjects in and completing our Phase 2b/3 PRISM trial and our Phase 2 CANAL trial;

initiating and successfully recruiting, enrolling and retaining subjects in and completing additional clinical and nonclinical trials of Haduvio, 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 the additional clinical trials we plan to conduct for the treatment of chronic cough in adults with IPF;

Our most advanced programs are the development of Haduvio for the treatment of prurigo nodularis and chronic cough in adults with IPF, as our efforts to develop Haduvio for other serious neurologically mediated conditions are only at an early stage.

As a result, if our efforts to develop and commercialize Haduvio for the treatment of prurigo nodularis or chronic cough in adults with IPF are unsuccessful or we experience significant delays in doing so, our business could also be substantially harmed.

The success of Haduvio for the treatment of prurigo nodularis and chronic cough in adults with IPF, as well as for other serious neurologically mediated conditions, will depend on several factors, including the following:

completing the open-label extension portion of our Phase 2b/3 PRISM trial;

initiating and successfully recruiting, enrolling and retaining subjects in and completing additional clinical and nonclinical trials of Haduvio, including the additional Phase 3 clinical trial we believe we would need to conduct to get FDA approval for Haduvio for the treatment of prurigo nodularis and the additional clinical trial we plan to conduct for the treatment of chronic cough in adults with IPF;

completion of other supportive clinical studies such as our planned HAL study, a potential physical dependence study and a potential TQT study;

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No therapies have been approved in the U.S.

or Europe for the treatment of severe pruritus in prurigo nodularis or chronic cough in IPF 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.

or Europe for the treatment of severe pruritus in prurigo nodularis or chronic cough in adults with IPF 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.

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

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we may decide, or regulators may require us, to restructure clinical trials, conduct additional clinical and nonclinical trials or abandon product development programs;

the number of subjects required for clinical trials may be larger than we anticipate, such as with the increase of the target number of enrolled subjects for our Phase 2b/3 PRISM trial from 240 to 360 subjects as a result of the SSRE analysis;

subject enrollment in these clinical trials may be slower than we anticipate, whether as a result of the COVID-19 pandemic or otherwise, or participants may discontinue their participation in these clinical trials at a higher rate than we anticipate, as we experienced in our Phase 2 clinical trial of Haduvio for the treatment of pruritus associated with prurigo nodularis;

the cost of planned clinical trials may be greater than we anticipate, as we have experienced in our Phase 2b/3 PRISM trial as we added additional sites, increased the target number of enrolled subjects as a result of the SSRE analysis, enrollment has taken longer than expected and we have used additional incentive strategies to address site activation and enrollment;

subject enrollment in clinical trials may be slower than we anticipate, whether as a result of the COVID-19 pandemic or otherwise, or participants may discontinue their participation in these clinical trials at a higher rate than we anticipate, as we experienced in our Phase 2b/3 PRISM trial of Haduvio for the treatment of prurigo nodularis;

the cost of planned clinical trials may be greater than we anticipate, such as with our Phase 2b/3 PRISM trial where we added additional sites, increased the target number of enrolled subjects, experienced enrollment that took longer than expected and used additional incentive strategies to address site activation and enrollment;

our clinical trials sites may not have adequate staff and resources to support our trials on a timely basis;

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be required to remove the product from the market after obtaining marketing approval.

Our failure to successfully and timely complete clinical trials of Haduvio for the treatment of pruritus associated with prurigo nodularis, chronic cough in IPF or for any other serious neurologically mediated condition or of any future product candidate and to demonstrate the efficacy and safety necessary to obtain regulatory approval to market any such product candidates would significantly harm our business and could result in the loss or impairment of our ability to generate revenues and effectuate our business strategy.

Our failure to successfully and timely complete clinical trials of Haduvio for the treatment of prurigo nodularis, chronic cough in adults with IPF or for any other serious neurologically mediated condition or of any future product candidate and to demonstrate the efficacy and safety necessary to obtain regulatory approval to market any such product candidates would significantly harm our business and could result in the loss or impairment of our ability to generate revenues and effectuate our business strategy.

Our clinical trials may fail to demonstrate adequately the safety and efficacy of Haduvio or any future product candidates, which would likely prevent or delay regulatory approval and commercialization.

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It is possible that even if Haduvio or any future product candidate has a beneficial effect, that effect will not be detected during clinical evaluation as a result of one or more of a variety of factors, including the size, duration, design, measurements, conduct or analysis of our clinical trials.

For example, our Phase 2 clinical trial of Haduvio for the treatment of pruritus associated with prurigo nodularis failed to meet its primary endpoint and the number of subjects who discontinued treatment prior to the end of the trial had a substantial impact on the results.

For example, our Phase 2 clinical trial of Haduvio for the treatment of prurigo nodularis failed to meet its primary endpoint and the number of subjects who discontinued treatment prior to the end of the trial had a substantial impact on the results.

Conversely, as a result of the same factors, our clinical trials may indicate an apparent positive effect of Haduvio or any future product candidate that is greater than the actual positive effect, if any.

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In addition, even if the clinical trials we plan are successfully completed and Haduvio or any future product candidate achieves its specified endpoints in such trials, we cannot guarantee that the FDA or foreign regulatory authorities will interpret the results as we do, and more trials could be required before we are able to submit product candidates for marketing approval.

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.

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 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 Phase 2b/3 PRISM trial require that enrolled subjects 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 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.

For instance, if the FDA does not believe that the results of the Phase 2b/3 PRISM 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 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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Our clinical trials evaluating the efficacy of Haduvio in pruritus indications have used PROs as primary endpoints.

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 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.

For example, the primary endpoint of our Phase 2b/3 PRISM trial was 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 the Worst Itch 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.

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 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.

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If we experience delays or difficulties in the enrollment of subjects in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.

We may not be able to initiate or continue clinical trials for Haduvio or any future product candidate if we are unable to locate and enroll a sufficient number of eligible subjects to participate in clinical trials as required by the FDA or comparable foreign regulatory authorities.

regulatory authorities.

Patient enrollment is a significant factor in the timing of our clinical trials and is affected by many factors, including:

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the impact of the COVID-19 pandemic.

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 subjects with this severe condition.

We experienced delays and difficulties in the enrollment of subjects 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.

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 or chronic cough associated with IPF, which are the same conditions for which we are or will be conducting clinical trials and patients are generally only able to enroll in a single trial at a time.

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

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

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 or chronic cough in adults with IPF, which are the same conditions for which we are or will be conducting clinical trials, 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 U.S.

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.

Similarly, many patients use various treatments off-label to treat chronic cough associated with IPF and these patients and their physicians may also be reluctant to forgo, discontinue or otherwise alter their use of such off-label therapeutic approaches to participate in our clinical trials.

or Europe for the treatment of 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.

Similarly, many patients use various treatments off-label to treat chronic cough in adults with IPF and these patients and their physicians may also be reluctant to forgo, discontinue or otherwise alter their use of such off-label therapeutic approaches to participate in our clinical trials.

In response to the COVID-19 pandemic, the FDA issued guidance on March 18, 2020, and updated it on July 2, 2020, January 27, 2021 and August 30, 2021, to address the conduct of clinical trials during the pandemic.

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Adverse events or undesirable side effects caused by, or other unexpected properties of, Haduvio or any future product candidate may be identified during development and could delay or prevent the marketing approval or limit the use of Haduvio or any future product candidate.

and could result in a more restrictive label or the delay or denial of marketing approval by the FDA or comparable foreign regulatory authorities.

Adverse events or undesirable side effects caused by or other unexpected properties of, Haduvio or any future product candidate could cause us, an institutional review board or regulatory authorities to interrupt, delay or halt clinical trials of such product candidate and could result in a more restrictive label or the delay or denial of marketing approval by the FDA or comparable foreign regulatory authorities.

We cannot be certain that serious adverse events, or SAEs, will not occur in future clinical trials, which could cause the FDA or comparable foreign regulatory authorities to interrupt, delay or halt clinical trials of such product candidate, approve a more restrictive label than we desire or delay or deny regulatory approval.

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Such drug-related side effects could also affect patient recruitment or the ability of enrolled subjects to complete a trial or result in potential product liability claims.

In our Phase 2 clinical trial of Haduvio for the treatment of pruritus associated with prurigo nodularis, the most frequently reported adverse events associated with Haduvio were nausea, dizziness and headache.

In the open label extension of the trial, nausea, dizziness and fatigue were reported.

Across both the Phase 2 clinical trial of Haduvio for the treatment of pruritus associated with prurigo nodularis and the open label extension, a total of four subjects reported SAEs, but none of these events was attributed to Haduvio.

In our Phase 2b/3 trial of Haduvio in patients with uremic pruritus, the most frequently reported adverse events attributed to Haduvio were nausea, vomiting, somnolence and dizziness.

In patients with uremic pruritus, SAEs were frequent but were primarily related to associated underlying diseases or to procedural complications related to hemodialysis.

In our clinical trials of Haduvio for the treatment of prurigo nodularis, the most frequently reported adverse events associated with Haduvio were nausea, dizziness, headache, constipation and somnolence.

If Haduvio or any future product candidate is associated with adverse events or undesirable side effects or demonstrates unexpected properties, we may need to abandon development or limit development of that product candidate to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective.

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Schedule I substances by definition have no established medicinal use and may not be marketed or sold in the U.S.

A pharmaceutical product may be listed as Schedule II, III, IV or V, with Schedule II substances

considered to present the highest risk of abuse and carrying the greater level of regulatory control and Schedule V substances considered to present the lowest relative risk of abuse among such substances and, accordingly, the lowest level of regulatory control.

A pharmaceutical product may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest risk of abuse and carrying the greater level of regulatory control and Schedule V substances considered to present the lowest relative risk of abuse among such substances and, accordingly, the lowest level of regulatory control.

Various states also independently regulate controlled substances.

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Regulatory authorities in foreign jurisdictions may also determine to classify Haduvio as a controlled substance under different, but potentially no less burdensome, regulations.

If Haduvio is classified as a controlled substance, the level of regulation would depend on how it is scheduled and we and our suppliers, manufacturers, contractors, distributors and any future customers would be required to obtain and maintain any applicable registrations from state, federal and foreign law enforcement and regulatory agencies and comply with any applicable state, federal and foreign laws and regulations regarding the manufacture, use, sale, importation, exportation and distribution of controlled substances.

Also, if Haduvio is classified as a controlled substance, there is a risk that such regulations could limit its supply for use in clinical trials and, in the future, limit our ability to produce and distribute Haduvio in the volume needed to meet potential commercial demand.

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For instance, Haduvio or any future product candidate may fail to show the desired safety and efficacy in clinical development despite demonstrating positive results in preclinical studies or successfully advancing through Phase 1 and Phase 2 clinical trials.

The results of our Phase 2 clinical trial of Haduvio for the treatment of pruritus associated with prurigo nodularis may not be predictive of the results of our Phase 2b/3 PRISM trial, and the interim results of our Phase 2 CANAL trial may not be predictive of the full trial results for the Phase 2 CANAL trial or of future trials of Haduvio for the treatment of chronic cough in adults with IPF.

The results of our Phase 2b/3 PRISM trial of Haduvio for the treatment of prurigo nodularis may not be predictive of the results of the next trial we believe we would need to conduct to attain regulatory approval, and the interim results of our Phase 2 CANAL trial may not be predictive of the full trial results for the Phase 2 CANAL trial or of future trials of Haduvio for the treatment of chronic cough in adults with IPF.

Many pharmaceutical and biotechnology companies have suffered significant setbacks in late-stage clinical trials after achieving positive results in earlier stages of clinical development and we could face similar setbacks.

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 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.

At a meeting with the FDA following the completion of our Phase 2 clinical trial of Haduvio for the treatment of 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.

In providing such advice, the FDA noted the small number of subjects 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 Phase 2b/3 PRISM trial.

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 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 subjects 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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Even if we believe that the results of clinical trials for Haduvio or any future product candidate warrant marketing approval, the FDA or comparable foreign regulatory authorities may disagree and may not grant marketing approval of the product candidate.

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 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 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 subjects with prurigo nodularis and uremic pruritus.

While we believe these data may be useful in informing the design of 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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As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that may prove to have greater commercial potential.

For example, we currently intend to focus our resources on the development of Haduvio for the treatment of pruritus associated with prurigo nodularis and for the treatment of chronic cough in adults with IPF.

For example, we currently intend to focus our resources on the development of Haduvio for certain indications.

However, the development of Haduvio for these indications may ultimately prove to be unsuccessful or less successful than another product candidate or other indications that we might have chosen to pursue with our limited resources.

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We expect that we will face significant competition from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide with respect to Haduvio or any future product candidate that we may seek to develop or commercialize.

Our competitors may succeed in developing, acquiring or licensing technologies and products that are more effective, have fewer or more tolerable side effects or are more convenient or less costly than Haduvio or any future product candidate we may develop, which could render any product candidates obsolete and noncompetitive.

candidates obsolete and noncompetitive.

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 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.

If Haduvio is approved for the treatment of 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 prurigo nodularis.

Sanofi has reported positive data from two Phase 3 trials of Dupixent for the treatment of prurigo nodularis and that it plans regulatory submissions around the world for this indication in 2022.

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INCB054707, an oral small molecule targeting the JAK 1 receptor being developed by Incyte;

M1880C, a topical non-steroidal anti-inflammatory drug, or NSAID, being developed by Maruho;

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 initiating Phase 3 clinical trials for chronic pruritus in patients with atopic dermatitis, and in Phase 2 clinical trials for chronic kidney disease, chronic liver disease and notalgia paresthetica.

If Haduvio is approved for the treatment of chronic cough in adults with IPF, we expect that it may compete with product candidates currently in clinical development for the treatment of chronic cough in adults with IPF, such as orvepitant, which is being developed by Nerre Therapeutics, and ifenprodil which is being developed by Algernon Pharmeceuticals.

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 prurigo nodularis, could face competition from these product candidates, including difelikefalin, an oral kappa opioid receptor agonist being developed by Cara Therapeutics that is initiating Phase 3 clinical trials for chronic pruritus in patients with atopic dermatitis, and in Phase 2 clinical trials for chronic kidney disease, chronic liver disease and notalgia paresthetica.

We 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, and Bellus Health.

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.

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 in adults with IPF.

Many of our potential competitors, alone or with their strategic partners, have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining marketing approvals and commercializing approved products than we do.

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and other countries, on the extent to which the costs of the product will be paid by third-party payors, including government health administration authorities and private health coverage insurers.

If coverage and reimbursement are not available or reimbursement is available only to limited levels, we

may not be able to successfully commercialize that product.

If coverage and reimbursement are not available or reimbursement is available only to limited levels, we may not be able to successfully commercialize that product.

Even if coverage is provided for the product, the approved reimbursement amount may not be high enough to allow us to establish or maintain pricing sufficient to realize a return on our investments.

, no uniform policy of coverage and reimbursement for products exists among third-party payors and coverage and reimbursement for products can differ significantly from payor to payor.

In the U.S., no uniform policy of coverage and reimbursement for products exists among third-party payors and coverage and reimbursement for products can differ significantly from payor to payor.

As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of any product we commercialize to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.

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Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment.

Therefore, our ability to commercialize any product candidate will depend in part on the extent to which coverage and reimbursement for these products and related treatments will be available from third-party payors.

Therefore, our ability to commercialize any product candidate will depend in part on the

extent to which coverage and reimbursement for these products and related treatments will be available from third-party payors.

Third-party payors decide which medications they will cover and establish reimbursement levels.

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We will need to increase our insurance coverage if we commercialize any product that receives marketing approval.

If we are unable to maintain sufficient insurance coverage at an acceptable cost or otherwise protect against potential clinical trial liability or product liability claims, the development and commercial production and sale of Haduvio or any future product candidate could be prevented or inhibited, which could harm our business, financial condition, results of operations and prospects.

sale of Haduvio or any future product candidate could be prevented or inhibited, which could harm our business, financial condition, results of operations and prospects.

Risks Related to Our Dependence on Third Parties

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Even if we are able to establish agreements with such third-party contractors, reliance on third-party contractors entails additional risks, including:

manufacturing delays if our third-party contractors prioritize the supply of other companies’ products over Haduvio or any future product candidates or otherwise fail to satisfactorily perform according to the terms of the agreements between us and them or if unforeseen events in the manufacturing process arise;

manufacturing delays if our third-party contractors prioritize the supply of other companies’ products over Haduvio or any future product candidates, experience supply chain-related delays, or otherwise fail to satisfactorily perform according to the terms of the agreements between us and them or if unforeseen events in the manufacturing process arise;

the possible termination or nonrenewal of agreements by our third-party contractors at a time that is costly or inconvenient for us;

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Bankruptcy Court for the District of Delaware, or the Bankruptcy Court.

In February 2022, the Bankruptcy Court approved a settlement of Mallinckrodt’s opioid litigation and broader chapter 11 reorganization plan, which is also subject to approval by Irish authorities.

In February 2022, the Bankruptcy Court approved a settlement of Mallinckrodt’s opioid litigation and broader chapter 11 reorganization plan, which was also subject to approval by Irish authorities.

On April 27, 2022, the High Court of Ireland confirmed the scheme of arrangement between Mallinckrodt, its creditors and its members under Irish law and ordered that the scheme of arrangement would become effective on the same date that the chapter 11 reorganization plan becomes effective.

It is currently uncertain what impact, if any, Mallinckrodt’s bankruptcy filing and the associated reorganization plan may have on its ability to continue supplying nalbuphine hydrochloride drug substance to us.

On June 16, 2022, Mallinckrodt announced that it had completed its reorganization process, emerged from chapter 11 bankruptcy proceedings and completed the Irish examinership proceedings.

It is currently uncertain what impact, if any, Mallinckrodt’s reorganization may have on its ability to continue supplying nalbuphine hydrochloride drug substance to us.

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.

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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.

In addition, we may face competition for access to manufacturing facilities as there may be a limited number of contract manufacturers operating under cGMPs that are able manufacture any such product.

In addition, we may face competition for access to manufacturing facilities as there may be a limited number of contract manufacturers operating under cGMPs that are able to manufacture any such product.

Consequently, we may not be able to reach agreement with third-party manufacturers on satisfactory terms, in a timely manner or at all, which could delay our commercialization efforts.

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We expect that we would be similarly dependent on third-party manufacturers of Haduvio at commercial scale or any future product candidate.

If our manufacturers cannot successfully manufacture drug substance or drug product that conforms to our specifications or the strict regulatory requirements of the FDA and any applicable foreign regulatory authority, they will not be able to secure the applicable approval for their

manufacturing facilities.

If these facilities are not approved for commercial manufacture, we may need to find alternative manufacturing facilities, which could result in delays in obtaining approval for the applicable product candidate and any future commercialization efforts.

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If third parties have filed patent applications on inventions claimed in our patents or applications on or before March 15, 2013, an interference proceeding in the U.S.

can be initiated by such third parties to determine who was the first to invent any of the

subject matter covered by the patent claims of our applications.

can be initiated by such third parties to determine who was the first to invent any of the subject matter covered by the patent claims of our applications.

If third parties have filed such applications after March 15, 2013, a derivation proceeding in the U.S.

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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 shortly 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 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.

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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Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during litigation.

There could also be public announcements of the results of hearings, motions or other interim proceedings or developments.

There could also be public announcements of the results of hearings, motions or other

interim proceedings or developments.

If securities analysts or investors perceive these results to be negative, it could adversely affect the price of shares of our common stock.

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A petition for inter partes review can be filed after the nine-month period for filing a post-grant review petition has expired for a patent with an effective filing date of March 16, 2013 or later.

Post-grant review proceedings can be brought on any ground of invalidity, whereas inter partes review proceedings can only raise grounds of invalidity based on lack of novelty or obviousness using published prior art and patents.

Post-grant review proceedings can be brought on any ground of invalidity, whereas inter partes

review proceedings can only raise grounds of invalidity based on lack of novelty or obviousness using published prior art and patents.

These adversarial actions at the USPTO review patent claims without the presumption of validity afforded to U.S.

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Consequently, we may not be able to prevent third parties from practicing our inventions in certain countries outside the U.S.

In addition, geo-political actions in the United States and in foreign countries could increase the uncertainties and costs surrounding the prosecution or maintenance of our patent applications and the maintenance, enforcement or defense of our issued patents.

For example, the United States and foreign government actions related to Russia’s invasion of Ukraine may limit or prevent filing, prosecution, and maintenance of patent applications in Russia.

Government actions may also prevent maintenance of issued patents in Russia.

These actions could result in abandonment or lapse of our patents or patent applications, resulting in partial or complete loss of patent rights in Russia.

If such an event were to occur, it could have a material adverse effect on our business.

In addition, a decree was adopted by the Russian government in March 2022, allowing Russian companies and individuals to exploit inventions owned by patentees from the United States without consent or compensation.

Consequently, we would not be able to prevent third parties from practicing our inventions in Russia or from selling or importing products made using our inventions in and into Russia.

Accordingly, our competitive position may be impaired, and our business, financial condition, results of operations and prospects may be adversely affected.

Agreements through which we license patent rights may not give us sufficient rights to permit us to pursue enforcement of our licensed patents or defense of any claims asserting the invalidity of these patents (or control of enforcement or defense) of such patent rights in all relevant jurisdictions as requirements may vary.

Proceedings to enforce our patent rights in foreign jurisdictions, whether or not successful, could result in substantial costs and divert our efforts and resources from other aspects of our business.

Moreover, such proceedings could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims

We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful.

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Risks Related to Regulatory Approval and Other Legal Compliance Matters

If the FDA does not conclude that Haduvio for the treatment of pruritus associated with prurigo nodularis, chronic cough in IPF or any other development program satisfies the requirements under Section 505(b)(2) of the FDCA 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 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.

If the FDA does not conclude that Haduvio for the treatment of prurigo nodularis, chronic cough in adults with IPF or any other development program satisfies the requirements under Section 505(b)(2) of the FDCA 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 have completed our Phase 2b/3 PRISM trial of Haduvio for the treatment of prurigo nodularis (other than the open-label extension portion of the trial, which we expect to complete in the first quarter of 2023) and we believe we will need to conduct an additional Phase 3 clinical trial of Haduvio for the treatment of 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.

Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies that were not conducted by or for the sponsor and for which the sponsor has not received a right of reference, which could expedite the development program for Haduvio by potentially decreasing the amount of preclinical and clinical data that we would need to generate in order to obtain FDA approval.

However, while we believe that Haduvio is a reformulation of an existing drug and, therefore, its active moiety will not be treated as a new chemical entity, or NCE, the submission of an NDA under the Section 505(b)(2) regulatory pathway does not preclude the FDA from determining that Haduvio contains an active moiety that is an NCE and, therefore, is not eligible for review under such regulatory pathway.

However, while we believe that Haduvio is a reformulation of an existing drug and,

therefore, its active moiety will not be treated as a new chemical entity, or NCE, the submission of an NDA under the Section 505(b)(2) regulatory pathway does not preclude the FDA from determining that Haduvio contains an active moiety that is an NCE and, therefore, is not eligible for review under such regulatory pathway.

If the FDA does not allow us to pursue the Section 505(b)(2) or similar regulatory pathway as anticipated, we may need to conduct additional preclinical experiments and clinical trials, provide additional data and information and meet additional standards for regulatory approval.

If this were to occur, the time and financial resources required to obtain FDA approval for Haduvio for the treatment of pruritus associated with prurigo nodularis and any future product candidates and complications and risks associated with these product candidates, would likely increase significantly.

If this were to occur, the time and financial resources required to obtain FDA approval for Haduvio for the treatment of prurigo nodularis and any future product candidates and complications and risks associated with these product candidates, would likely increase significantly.

Moreover, our inability to pursue the Section 505(b)(2) regulatory pathway could result in new competitive products reaching the market more quickly than our product candidates, which would likely harm our competitive position and prospects.

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Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical or other studies.

In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit

or prevent marketing approval of a product candidate.

In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate.

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.

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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.

We expect that we will be subject to additional risks in commercializing any of our product candidates that receive marketing approval outside the U.S.

, including tariffs, trade barriers and regulatory requirements;

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

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

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and workforce uncertainty in countries where labor unrest is more common than in the U.S.

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.

A F ast T rack designation, grant of P riority R eview status or B reakthrough T herapy 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.

We may be eligible for Fast Track designation, Priority Review or Breakthrough Therapy status for specific indications for the product candidates we may develop.

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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.

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 designation for a different indication, 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.

We have received Fast Track designation for the program to develop Haduvio for the treatment of itch in patients with prurigo nodularis, however this designation or any future Fast Track designation for a different indication, 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.

We may seek PRIME Designation in the EU for Haduvio but we might not receive such designations and, even if we do, such designations may not lead to a faster development or regulatory review or approval process.

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If we fail to comply or are found to be in violation of FDA regulations restricting the promotion of Haduvio for unapproved uses, we could be subject to criminal penalties, substantial fines or other sanctions and damage awards.

If our clinical trials are successful, we intend to seek approval to market Haduvio for the treatment of pruritus associated with prurigo nodularis and chronic cough associated with IPF.

If we obtain regulatory approval to market Haduvio with an indication statement for the treatment of pruritus associated with prurigo nodularis, we expect to be prohibited from marketing Haduvio using any promotional claims relating to treatment of pruritus generally.

If we obtain regulatory approval to market Haduvio with an indication statement for the treatment of chronic cough in adults with IPF, we expect to be prohibited from marketing Haduvio using any promotional claims relating to treatment of cough generally.

If our clinical trials are successful, we intend to seek approval to market Haduvio for the treatment of prurigo nodularis and chronic cough in adults with IPF.

If we obtain regulatory approval to market Haduvio with an indication statement for the treatment of prurigo nodularis, we expect to be prohibited from marketing Haduvio using any promotional claims relating to treatment of pruritus generally.

If we obtain regulatory approval to market Haduvio with an indication statement for the treatment of chronic cough in

adults with IPF, we expect to be prohibited from marketing Haduvio using any promotional claims relating to treatment of cough generally.

Marketing of Haduvio may also be limited by regulatory authorities based on use as a monotherapy or adjuvant, concomitant medications, severity of pruritus and other factors.

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In September 2021, the FDA published final regulations which describe the types of evidence that the agency will consider in determining the intended use of a drug product.

While we have conducted, and may in the future conduct, clinical trials to evaluate the use of Haduvio to treat pruritic conditions other than pruritus associated with prurigo nodularis and cough conditions other than chronic cough associated with IPF, Haduvio cannot be promoted for uses other than uses approved in the labeling by the FDA, EMA, MHRA or other applicable regulatory authorities.

While we have conducted, and may in the future conduct, clinical trials to evaluate the use of Haduvio to treat pruritic conditions other than prurigo nodularis and cough conditions other than chronic cough in adults with IPF, Haduvio cannot be promoted for uses other than uses approved in the labeling by the FDA, EMA, MHRA or other applicable regulatory authorities.

Physicians may nevertheless prescribe Haduvio off-label to their patients in a manner that is inconsistent with the approved label.

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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 market any product for an indication that is not approved, we may be subject to w arnings 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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may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic and may experience delays in their regulatory activities.

If a prolonged government shutdown or other disruption 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.

If a prolonged government shutdown or other disruption 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.

Future shutdowns or other disruptions could also affect other government agencies such as the SEC, which may also impact our business by delaying review of our public filings, to the extent such review is necessary, and our ability to access the public markets.

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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.

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.

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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 U.S.

, or the sharing with certain non-U.S.

Various laws, regulations and executive orders also restrict the use and dissemination outside of the U.S., 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.

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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 U.S., 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 U.S., which could limit our growth potential and increase our development costs.

If we expand our presence outside of the U.S.

, 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 U.S.

, which could limit our growth potential and increase our development costs.

The failure to comply with laws governing international business practices may result in substantial civil and criminal penalties and suspension or debarment from government contracting.

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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.

periods of exclusivity before approving generic versions of those products, the sales of our products, if approved, could be adversely affected.

If the FDA, EMA, MHRA or other comparable foreign regulatory authorities approve generic versions of any of our small molecule investigational products that receive marketing approval, or such authorities do not grant our products appropriate periods of exclusivity before approving generic versions of those products, the sales of our products, if approved, could be adversely affected.

Once an NDA is approved, the product covered thereby becomes a “reference listed drug” in the FDA’s publication, “Approved Drug Products with Therapeutic Equivalence Evaluations,” commonly known as the Orange Book.

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Our future success depends on our ability to retain our executive team and to attract, retain and motivate qualified personnel.

We are highly dependent on Jennifer Good, our President and Chief Executive Officer;

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

and William Forbes, Pharm.

D., our Chief Development Officer;

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

We are highly dependent on Jennifer Good, our President and Chief Executive Officer, and Thomas Sciascia, M.D., our Chief Medical Officer, as well as the other principal members of our management and scientific teams.

Although we have formal employment agreements with Ms.

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Except as otherwise required by law, all 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.

For instance, on August 8, 2022, Dr.

Forbes notified the Company that he would be stepping down as Chief Development Officer, effective September 1, 2022.

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 March 31, 2022, we had 23 employees.

As of June 30, 2022, 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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Our inability to manage the expansion of our operations effectively may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees.

Our expected growth could also require significant capital expenditures and may divert financial resources from

other projects, such as the development of Haduvio for additional indications or the development of additional product candidates.

If we are unable to effectively manage our expected growth, our expenses may increase more than expected, our ability to generate revenues could be reduced and we may be un able to implement our business strategy, including the successful commercialization of any product candidate.

Our expected growth could also require significant capital expenditures and may divert financial resources from other projects, such as the development of Haduvio for additional indications or the development of additional product candidates.

If we are unable to effectively manage our expected growth, our expenses may increase more than expected, our ability to generate revenues could be reduced and we may be unable to implement our business strategy, including the successful commercialization of any product candidate.

Our employees, independent contractors and consultants may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements, which could cause significant liability for us and harm our reputation.

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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.

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 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.

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Although we were able to regain compliance with the Bid Price Requirement within the manner and time period prescribed by Nasdaq, there can be no assurance that we will be able to maintain compliance with the Bid Price Requirement or other Nasdaq continued listing requirements in the future or that we will be able to regain compliance with respect to any future deficiencies.

If we fail to satisfy the Nasdaq Global Market’s continued listing requirements, we may submit an application to transfer to the Nasdaq

Capital Market, which generally has lower financial requirements for initial listing, in an effort to avoid delisting.

If we fail to satisfy the Nasdaq Global Market’s continued listing requirements, we may submit an application to transfer to the Nasdaq Capital Market, which generally has lower financial requirements for initial listing, in an effort to avoid delisting.

However, we may not be able to satisfy the initial listing requirements for the Nasdaq Capital Market and may therefore not be able to transfer our listing to the Nasdaq Capital Market.

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market conditions in the pharmaceutical and biotechnology sectors;

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;

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

our obligations in connection with the SVB Term Loan;

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

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

In addition, the COVID-19 pandemic, rising inflation, interest rate increases and other factors have 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 such 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 March 31, 2022, we had sold 3,583,394 shares of common stock for an aggregate purchase price of $11.0 million, before deducting estimated commissions and allocated fees of $0.8 million, pursuant to the ATM Sales Agreement.

As of June 30, 2022, we had sold 3,583,394 shares of common stock for an aggregate purchase price of $11.0 million, before deducting estimated commissions and allocated fees of $0.8 million, pursuant to the ATM Sales Agreement.

In May 2022, we amended the ATM Sales Agreement with SVB Leerink LLC to increase the maximum aggregate offering price of common stock that we may issue and sell from time to time under the ATM Sales Agreement by $50.0 million, from $12.0 million to up to $62.0 million.

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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The Initial Private Placement Investor may resell all, some or none of the shares of common stock registered pursuant to the Initial Private Placement Form S-3 at any time or in its discretion, subject to the Initial Private Placement Beneficial Ownership Limitations.

As of May 12, 2022, all of the pre-funded warrants and 3,299,270 of the common stock warrants have been exercised.

As of August 11, 2022, all of the pre-funded warrants and the common stock warrants that were set to expire on April 5, 2025 have been exercised.

Similarly, on October 18, 2021, we issued to New Enterprise Associates 16, L.P., or NEA, in a private placement, 1,851,852 shares of our common stock and accompanying warrants to purchase an aggregate of 3,703,704 shares of our common stock.

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Similarly, on April 11, 2022, we issued to several purchasers in a private placement, (i) an aggregate of 4,580,526 shares of our common stock and (ii) pre-funded warrants to purchase an aggregate of 24,379,673 shares of our common stock.

Under the terms of the pre-funded warrants, we may not effect the exercise of any such warrant, and a purchaser will not be entitled to exercise any portion of any such warrant, if, upon giving effect to such exercise, the aggregate number of shares of common stock beneficially owned by such purchaser (together with its affiliates, any other persons acting as a group together with such purchaser or any of such purchaser’s affiliates, and any other persons whose beneficial ownership of common stock would or could be aggregated with such purchaser's for purposes of Section 13(d) or Section 16 of the Exchange Act) would exceed 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of such warrant, which percentage may be increased or decreased at such purchaser’s election upon 61 days’ notice to us subject to the terms of such warrants, provided that such percentage may in no event exceed 19.99%.

purchaser's for purposes of Section 13(d) or Section 16 of the Exchange Act) would exceed 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of such warrant, which percentage may be increased or decreased at such purchaser’s election upon 61 days’ notice to us subject to the terms of such warrants, provided that such percentage may in no event exceed 19.99%.

We refer to such percentage limitations as the 2022 Private Placement Beneficial Ownership Limitations.

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The purchasers will be able to resell all, some or none of the shares of common stock registered pursuant to the Third Private Placement Form S-3 at any time or in their discretion , subject to the 2022 Private Placement Beneficial Ownership Limitations .

Sales of substantial amounts of shares of our common stock or other securities by our stockholders, by us under the Shelf Registration Statement, whether pursuant to the ATM Sales Agreement or otherwise, by Lincoln Park pursuant to the Form S-1, by the private placement investors pursuant to the Initial Private Placement Form S-3 or the Second Private Placement Form S-3 or through any other means could also lower the market price of our common stock, make it more difficult for you to sell your shares at a price that you desire and impair our ability to raise capital through the sale of equity or equity-related securities.

Sales of substantial amounts of shares of our common stock or other securities by our stockholders, by us under the Shelf Registration Statement, whether pursuant to the ATM Sales Agreement or otherwise, by Lincoln Park pursuant to the Form S-1, by the private placement investors pursuant to the Initial Private Placement Form S-3, the Second Private Placement Form S-3 or the Third Private Placement Form S-3 or through any other means could also lower the market price of our common stock, make it more difficult for you to sell your shares at a price that you desire and impair our ability to raise capital through the sale of equity or equity-related securities.

The number of shares of common stock underlying our outstanding warrants is significant in relation to our currently outstanding common stock, which could have a negative effect on the market price of our common stock and make it more difficult for us to raise funds through future equity offerings.

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As discussed above, the common stock warrants issued to the Initial Private Placement Investor are subject to the Initial Investor Beneficial Ownership Limitations and the pre-funded warrants issued to the purchasers in the April 2022 Private Placement are subject to the 2022 Private Placement Beneficial Ownership Limitations.

As of May 12, 2022, (i) none of the pre-funded warrants issued to the Initial Private Placement Investor were outstanding, (ii) 11,299,270 of the common stock warrants issued to the Initial Private Placement Investor and all of the common stock warrants issued to NEA in the October 2021 Private Placements remained outstanding, and (iii) all of the pre-funded warrants issued to the purchasers in the April 2022 Private Placement remained outstanding.

As of August 11, 2022, (i) none of the pre-funded warrants issued to the Initial Private Placement Investor were outstanding, (ii) 7,299,270 of the common stock warrants issued to the Initial Private Placement Investor and all of the common stock warrants issued to NEA in the October 2021 Private Placements remained outstanding, and (iii) all of the pre-funded warrants issued to the purchasers in the April 2022 Private Placement remained outstanding.

Although the Initial Private Placement Investor’s warrants are subject to the Initial Investor Beneficial Ownership Limitations and the pre-funded warrants issued to the purchasers in the April 2022 Private Placement are subject to the 2022 Private Placement Beneficial Ownership Limitations, upon exercise in full of the warrants, the shares issuable upon exercise would represent a significant portion of our outstanding common stock.

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The concentration of voting power resulting from the exercise of the warrants could delay, defer or prevent a change of control, entrench our management and our board of directors or delay or prevent a merger, consolidation, takeover or other business combination involving us on terms that other stockholders may desire.

In addition, conflicts of interest could arise in the future between us, on the one hand, and the Initial Private Placement Investor, NEA and/or the purchasers in

the April 2022 Private Placement on the other hand, concerning potential competitive business activities, business opportunities, the issuance of additional securities and other matters.

In addition, conflicts of interest could arise in the future between us, on the one hand, and the Initial Private Placement Investor, NEA and/or the purchasers in the April 2022 Private Placement on the other hand, concerning potential competitive business activities, business opportunities, the issuance of additional securities and other matters.

In addition, sales of these shares could cause the market price of our common stock to decline significantly.

Furthermore, in the event of a sale of our company, whether by merger, sale of all or substantially all of our assets or otherwise, the Initial Private Placement Investor and NEA would be entitled to receive, with respect to each share of common stock issuable upon exercise of the warrants then held by them and, and in the case of the Initial Private Placement Investor, without regard to the Beneficial Ownership Limitations, the same amount and kind of securities, cash or property as they would have been entitled to receive if such securities had been converted into or exercised for shares of our common stock immediately prior to such sale of our company.

Although the Initial Private Placement Investor’s beneficial ownership of our common stock is reported as 9.99% as a result of the application of the Beneficial Ownership Limitations, in the event of a sale of our company, the Initial Private Placement Investor would receive sale consideration without regard to the Beneficial Ownership Limitations.

consideration without regard to the Beneficial Ownership Limitations.

In such a sale, the Initial Private Placement Investor would be entitled to receive a significantly larger portion of the total proceeds distributable to the holders of our securities than is represented by its reported beneficial ownership of our common stock.

In addition, pursuant to the terms of the common stock warrants issued to both the Initial Private Placement Investor and NEA in our October 2021 Private Placements, in specified circumstances upon a fundamental transaction by us, such warrant holders may have the right to require us to repurchase their common stock warrants at their fair value using a Black Scholes option pricing formula.

As a result, in the event of a sale of our company, the Initial Private Placement Investor and NEA may be entitled to receive a significantly larger portion of the total proceeds distributable to our stockholders than they would if they exercised the warrants immediately prior to the transaction, and our stockholders could receive significantly less than they otherwise would in such a transaction.

In addition, pursuant to the terms of the common stock warrants issued to both the Initial Private Placement Investor and NEA in our October 2021 P rivate P lacements, in specified circumstances upon a fundamental transaction by us, such warrant holders may have the right to require us to repurchase their common stock warrants at their fair value using a Black Scholes option pricing formula.

As a result, in the event of a sale of our c ompany, the Initial Private Placement Investor and NEA may be entitled to receive a significantly larger portion of the total proceeds distributable to our stockholders than they would if they exercised the warrants immediately prior to the transaction, and our stockholders could receive significantly less than they otherwise would in such a transaction.

Given the amount and terms of these warrants, we may find it more difficult to raise additional equity capital on favorable terms or at all while these warrants are outstanding.

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, their respective affiliates, and other holders of 10% or more of our common stock beneficially own, in the aggregate, shares representing approximately 50.8% of our common stock as of May 12, 2022.

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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For so long as we remain an emerging growth company, we are permitted and plan to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies.

compensation in our periodic reports, proxy statements and registration statements and not being required to hold a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or SOX Section 404, not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements and not being required to hold a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” which would allow us to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of SOX Section 404 and reduced disclosure obligations regarding executive compensation.

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In general, under Section 382 of the Internal Revenue Code of 1986, as amended, or the IRC, 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.

Due to our Series A convertible preferred stock financing in December 2012 and the shares issued in connection with our IPO in May 2019, an

“ownership change” under Section 382 of the IRC occurred.

Due to our Series A convertible preferred stock financing in December 2012 and the shares issued in connection with our IPO in May 2019, an “ownership change” under Section 382 of the IRC occurred.

As a result, our ability to use approximately $91.3 million of our net operating loss carryforwards and approximately $3.0 million of our research and development tax credits is limited.

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

For example, in our ongoing Phase 2b/3 PRISM trial, new subject 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 required some remote monitoring of subject data, although all sites are now allowing in-person monitoring visits.

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 COVID-19 .

In addition, the clinical sites in our ongoing Phase 2 CANAL trial for chronic cough in adults with IPF experienced delays in the enrollment and treatment of subjects 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 subject visits and procedures .

For example, in our Phase 2b/3 PRISM trial, new subject 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 required some remote monitoring of subject 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 COVID-19.

In addition, the clinical sites in our Phase 2 CANAL trial for chronic cough in adults with IPF experienced delays in the enrollment and treatment of subjects 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 subject visits and procedures.

Although both the Phase 2 CANAL and Phase 2b/3 PRISM trials have now ended enrollment, the COVID-19 pandemic could still adversely affect our ability to retain subjects, 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, or potential inability of subjects to comply with clinical trial protocols if quarantines or travel restrictions impede subject movement or interrupt healthcare services.

The response to the COVID-19 pandemic may also redirect resources of regulators in a way that could adversely impact our ability to progress regulatory approvals and we may face impediments to regulatory meetings and approvals relating to our clinical trials due to measures intended to limit in-person interactions.

The response to the COVID-19 pandemic may also redirect resources of regulators in a way that could adversely impact our

ability to progress regulatory approvals and we may face impediments to regulatory meetings and approvals relating to our clinical trials due to measures intended to limit in-person interactions.

The COVID-19 pandemic may also affect employees of third-party contract research organizations located in affected geographies that we rely upon to carry out our clinical trials.

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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