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Item 1. Business

2023-03-14 compared with 2022-03-17 · 214 added, 298 removed, 269 unchanged (66% of the section changed)

ITEM 1 - BUSINESS

We are a biopharmaceutical company focused on developing proprietary, innovative and differentiated therapies for the treatment of immuno-inflammatory conditions.

Our most advanced product candidate, FMX114, which is in Phase 2a, is being evaluated for the potential treatment of mild-to-moderate atopic dermatitis (“AD”).

We are also in the preclinical stages of developing products containing Bromodomain and Extra-Terminal Domain (or “BET”) inhibitor compounds.

Our initial BET inhibitor candidate in development is VYN201, a locally administered pan-BET inhibitor, which we are exploring in various immuno-inflammatory diseases, including skin diseases .

In addition, we continue to explore opportunistic transactions that may enhance our pipeline portfolio, as well as support our current operations and fund our future growth.

In 2020, we commercially launched two dermatology products, AMZEEQ (minocycline) topical foam, 4%, and ZILXI (minocycline) topical foam, 1.5%, that we developed in-house using our proprietary molecule stabilizing technology (MST) platform and clinical development capabilities.

Following a review of our business in the first half of 2021, including the revenues we had received from these commercial products, the market environment for specialty pharmaceutical companies and the potential for biopharmaceutical companies with novel immuno-inflammatory pipelines, we determined to divest our commercial dermatology business and refocus our strategic efforts and resources toward advancing our pipeline and development platform for products to treat immuno-inflammatory conditions.

See "—Divestiture of Minocycline Business" and“Part II.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Company Overview” for further discussion regarding the sale of our MST franchise, including AMZEEQ, ZILXI, and FCD105, to Journey Medical Corporation.

Immuno-Inflammatory Disease

Our therapies are being evaluated for their potential to target inflammatory/autoimmune disease (which we refer to “immuno-inflammatory diseases”).

These immune system disorders are caused by the immune system having too much activation or too little inhibition.

There are dozens of known types of immuno-inflammatory diseases, many of which are severely debilitating and/or life threatening.

Our therapeutic goal in immuno-inflammatory disease is to deliver a potent anti-inflammatory response while minimizing systemic side effects.

Our most advanced product candidate, FMX114, is being evaluated for the potential treatment of mild-to-moderate AD.

AD is a chronic immune-mediated disease that is characterized by the appearance of dry, red, and itchy skin.

FMX114 is being developed to address both the source and cause of inflammation in AD by developing a distinct combination gel formulation of tofacitinib, a Janus kinase inhibitor (“JAK”), aimed at reducing inflammation by inhibiting cytokine release from inflammatory cells, and fingolimod, a Sphingosine 1-phosphate receptor modulator, which approaches the reduction of inflammation by inhibiting migration of inflammatory cells, and in addition may also directly support skin barrier recovery.

See “—Our Portfolio of Product Candidates—FMX114 for Mild-to-Moderate Atopic Dermatitis” for additional information regarding our FMX114 program.

In addition, in August 2021, we entered into a transaction with In4Derm Limited ("In4Derm") providing us with exclusive worldwide rights to research, develop and commercialize products containing BET inhibitors for the treatment of any disease, disorder or condition in humans.

Through our access to this library of new chemical BET inhibitor compounds (our “InhiBET™ platform”), we plan to develop BET inhibitor product candidates in various modes of administration and for a diverse set of indications.

Based on preclinical data generated to date, we believe therapeutics generated by our InhiBET™

platform have the potential to provide patient benefit in a broad range of immune system disorders.

Accordingly, we have chosen to focus our initial efforts for this platform on select therapeutic areas with unmet medical needs in immuno-inflammatory disease.

BET proteins play a key role in regulating gene transcription via epigenetic interactions (“reading”), and recent research has determined a key role for these BET proteins in regulating B cell and T cell activation and subsequent inflammatory processes.

As epigenetic readers, BET proteins regulate the recruitment of transcriptional factors that are key to the production of several pro-inflammatory cytokines.

Inhibiting BET proteins blocks cytokine transcription and therefore may have significant therapeutic potential across a wide variety of immuno-inflammatory/fibrotic and myeloproliferative neoplastic disorders.

Our initial BET inhibitor candidate in development is VYN201, which was developed using the InhiBET™ platform and is a locally administered pan-bromodomain, or pan-BD, BET inhibitor.

It is a first-in-class “soft” pan-BD BET inhibitor that is designed to address diseases involving multiple, diverse inflammatory cell signaling pathways.

Through our license with In4Derm, we are developing VYN201 for local administration for various immuno-inflammatory diseases, including skin diseases.

Based on preclinical data to date, we believe VYN201 has the potential to deliver a potent, localized anti-inflammatory effect to the affected area and be rapidly cleared through the body’s metabolic process.

As part of our partnership with In4Derm, we also have an exclusive option to license In4Derm’s highly selective bromodomain 2 BET inhibitors for oral administration.

We believe bromodomain 2 selective oral BET inhibitors may present as more conveniently-administered non-biologic treatment options for both acute control and chronic management of immuno-inflammatory indications, where the damaging effects of unrestricted inflammatory signaling activity is common.

We intend to execute on our strategy, including the following:

Develop our combination product candidate, FMX114 .

FMX114 is our proprietary investigational combination gel formulation of tofacitinib and fingolimod and is being developed to address both the source and cause of inflammation in AD.

We believe FMX114 has the potential to be the first topical combination product for the treatment of AD and is the first topical product in clinical development that utilizes the sphingosine 1-phosphate receptor modulation mode of action.

We expect to receive topline results from our Phase 2a study evaluating the safety and efficacy of FMX114 for mild-to-moderate AD in the second quarter of 2022.

Establish our InhiBET™ BET inhibitor platform as a proprietary product development vehicle .

By leveraging our proven drug development and clinical development capabilities and strong network of discovery and preclinical science partners, we intend to discover and develop BET inhibitor product candidates in various modes of administration and for a diverse set of indications.

Our goal is to capitalize on these strengths and establish InhiBET™ as a proprietary product development vehicle.

Maximize the value of our pipeline and platform via potential partnering activities .

We believe our pipeline is unique and has broad utility.

For example, based on our preclinical efforts to date, we believe VYN201 has the potential to be developed for a variety of immuno-inflammatory indications and multiple modes of administration.

We intend to continue to leverage our existing pipeline and platform to actively explore and evaluate potential value-creating partnering opportunities.

Expand our product candidate portfolio and pipeline through in‑licensing or acquisitions of additional product candidates or technologies.

In addition to developing product candidates organically within our organization, we may in‑license or acquire product candidates from third parties by leveraging our business development capabilities.

With a goal of building a well‑balanced and diversified portfolio, we assess a variety of factors for potential product candidates and technologies.

Our criteria for possible acquisition or in-licensing opportunities includes rationale for addressing the disease, likelihood of regulatory approval, commercial viability, intellectual property protection, prospects for favorable pricing and reimbursement and competition.

We intend to continue to be opportunistic in our business development activities to achieve our long-term strategic goals.

We are a clinical-stage biopharmaceutical company focused on developing proprietary, innovative and differentiated therapies for the treatment of immuno-inflammatory conditions.

In August 2021, we entered into a transaction with Tay Therapeutics Ltd.

(formerly known as In4Derm Ltd., "Tay") providing us with exclusive worldwide rights to research, develop and commercialize products containing bromodomain and extra-terminal (“BET”) inhibitors for the treatment of any disease, disorder or condition in humans.

Through our access to this library of new chemical BET inhibitor compounds, we plan to develop product candidates for a diverse set of indications.

Based on preclinical data generated to date, we have chosen to focus our initial efforts for this platform on select therapeutic areas in immuno-inflammatory disease.

Our lead program is VYN201, a locally administered pan-BET inhibitor designed as a “soft” drug to address diseases involving multiple, diverse inflammatory cell signaling pathways while providing low systemic exposure.

To date, VYN201 has produced consistent reductions in pro-inflammatory and disease-related biomarkers, improvements in disease severity and a demonstrated local activity through several preclinical models.

We believe that these data suggest potential broad utility for VYN201 across multiple routes of administration.

In November 2022, we initiated a Phase 1a/b clinical trial evaluating a topical formulation of VYN201 for the treatment of nonsegmental vitiligo.

In February 2023, we announced positive preliminary safety data from the Phase 1a portion of the trial.

The first nonsegmental vitiligo patient was dosed in the Phase 1b portion of the trial in January 2023 and we expect topline results from this trial in mid-2023.

Our second program is VYN202, a BD2-selective oral small molecule BET inhibitor.

VYN202 is in preclinical development for the treatment of immuno-inflammatory indications, and is being designed to achieve class-leading selectivity (BD2 vs.

BD1), maximum potency versus BD2 and optimal oral bioavailability.

By maximizing BD2 selectivity, we believe VYN202 has the potential to be a more conveniently-administered non-biologic treatment option for both acute control and chronic management of immuno-inflammatory indications, where the damaging effects of unrestricted inflammatory signaling activity is common.

We intend to actively evaluate and enter into strategic partnerships to advance our product candidates through the clinic toward commercialization, and may also partner with leading pharmaceutical companies to advance our molecules in therapeutic areas outside of our core focus in immunology.

We believe selectively entering into collaborations has the potential to expand and accelerate the development of our programs and maximize the value of our pipeline.

BET Inhibition and Immuno-Inflammatory Disease

BET proteins are epigenetic enablers of transcription and regulate the expression of specific genes.

Each BET protein consists of two bromodomains (BD1 and BD2) and one end terminal domain.

BD1 and BD2 enable chromatin remodeling and recruit transcription factors to facilitate gene transcriptions.

In certain cases, BET proteins activate oncogenes leading to increased cell proliferation and survival and an increase in solid tumors and hematologic malignancies.

BET inhibitors have the potential to downregulate the expression of such oncogenes.

These observations have resulted in the generation and clinical investigation of BET inhibitors in several cancer subtypes by pharmaceutical companies, including large pharmaceutical companies.

In addition to impacting oncogenetics, BET proteins regulate the expression of many immunity-associated genes and pathways by directing the transcription of a wide range of pro-inflammatory and immunoregulatory genes, leading to increased cytokine expression that activate B cells and T cells and subsequent inflammatory processes.

Inhibiting BET proteins prevents the formation of complexes required to facilitate transcription, thereby inhibiting the subsequent translation of the corresponding protein.

As such, BET inhibitors could present as an attractive, non-steroidal, therapeutic option for the treatment of immuno-inflammatory diseases.

Our Portfolio of Product Candidates

FMX114 for Mild-to-Moderate Atopic Dermatitis

In March 2021, we announced development plans for FMX114 for the potential treatment of mild-to-moderate AD.

FMX114 is a fixed combination of tofacitinib and fingolimod.

Tofacitnib reduces inflammation intracellularly by inhibiting cytokine release from inflammatory cells.

Fingolimod reduces inflammation by inhibiting migration of inflammatory cells and may directly support upregulation of filaggrin.

By combining tofacitinib and fingolimod in a topical gel formulation, FMX114 attempts to address both the source and cause of inflammation in AD and support skin barrier recovery.

Preclinical Data

FMX114 was evaluated in a well-known preclinical model in which dorsal depilated BALB-C mice were dosed with 100µl topical dinitrochlorobenzene ("DNCB") solution to induce a type 2 inflammatory response in the skin with AD-like pathology.

There was a 32-day induction phase followed by seven days of both DNCB and investigational drug concomitant treatment.

Two doses of FMX114 (0.6% tofacitinib + 0.01% fingolimod and 0.3% tofacitinib + 0.02% fingolimod) were compared with tofacitinib monotherapy, fingolimod monotherapy, triamcinolone (steroid) 0.1%, and DNCB control.

Key findings from the study include the following:

• Treatment with FMX114 0.6% tofacitinib + 0.01% fingolimod combination gel resulted in an 89% reduction in the modified atopic dermatitis index score (mADI) relative to the DNCB control group at day 7.

• Both FMX114 doses had comparable efficacy to triamcinolone 0.1% cream, a product widely used in the treatment of AD.

• Animal body weight was also evaluated to help determine tolerance to treatment.

◦ In both FMX114 treatment groups, the animals experienced body weight gains comparable to DNCB negative control and vehicle-treated healthy control animal groups.

◦ Animals treated with triamcinolone 0.1% cream lost approximately 21% of their body weight compared to the animals treated with FMX114.

Phase 1b /2a Study

In October 2021, we enrolled the first patient in our Phase 1b/2a clinical trial evaluating FMX114 for the treatment of mild-to-moderate AD.

After considering the Food and Drug Administration's (the "FDA") recent review of the oral JAK inhibitor class for the treatment of several systemic autoimmune diseases, we believe it was important to characterize the preliminary safety and pharmacokinetic profile of FMX114 before advancing to the Phase 2a portion of the study.

On January 19, 2022, we announced the Phase 1b data showing that systemic bioavailability of tofacitinib and fingolimod in topical formulation was substantially lower when compared to their oral equivalents.

Specifically, the mean plasma C max of tofacitinib calculated on treatment day 1 and day 14 were approximately 50-fold and 1500-fold lower, respectively, when compared to the equivalent data for the lowest commercially available adult oral dose of tofacitinib (XELJANZ 5mg BD) and the pharmacokinetics of fingolimod and active metabolite, fingolimod 1-phosphate, could not be determined as all whole blood concentrations were below the assay LLOQ (0.08ng/ml for both analytes).

We expect to receive topline results from our Phase 2a study evaluating the safety and efficacy of FMX114 for mild-to-moderate AD in the second quarter of 2022.

Market Opportunity

AD is a skin disorder that causes long-term inflammation of the skin, resulting in itchy, red, swollen and cracked skin.

Onset can occur at any age, but is more common in infants and children.

Of the approximately 30 million people diagnosed with AD in the United States, approximately 19 million are characterized as mild-to-moderate disease severity.

In 2019, 7.1 million patients used prescription medication to treat AD, with topical glucocorticosteroids accounting for 8 of the 10 highest prescribed topical products for AD.

We believe FMX114, if approved, can provide an attractive treatment option for physicians and patients by demonstrating efficacy that is comparable to that of a glucocorticosteroid with an improved safety profile.

InhiBET BET Inhibitor Platform

As a result of our partnership with In4Derm, we have exclusive worldwide rights to research, develop and commercialize products containing certain BET inhibitor compounds for the treatment of any disease, disorder or condition in humans.

See "—Development and License Agreements—In4Derm License Agreements." Utilizing our InhiBET TM platform and through our preclinical activities, we are evaluating the impact that BET inhibitor compounds have on regulating pro-inflammatory cytokines.

Based on this evaluation, we are targeting indications whose pathogenesis is linked to the proliferation of these specific cytokines, and we are developing formulations designed to maximize the anti-inflammatory effect of the drug while minimizing any potential safety concerns.

Through our InhiBET™ product development platform, we believe we can demonstrate the potential utility of these BET inhibitor compounds and develop therapies for a variety of immuno-inflammatory conditions .

Through our partnership with Tay, we have exclusive worldwide rights to research, develop and commercialize products containing certain BET inhibitor compounds for the treatment of any disease, disorder or condition in humans.

See "—Development and License Agreements—Tay License Agreements." Utilizing our InhiBET platform and through our preclinical and clinical activities, we are evaluating the impact that BET inhibitor compounds have on regulating pro-inflammatory cytokines.

Through our InhiBET development platform, we believe we can demonstrate the potential utility of these BET inhibitor compounds and develop therapies for a variety of immuno-inflammatory conditions.

VYN201 - Locally Administered Pan-BD BET Inhibitor

Our initial BET inhibitor candidate in development is VYN201.

Our lead BET inhibitor candidate in development is VYN201.

VYN201 was developed using the InhiBET platform and is a locally administered pan-BD BET inhibitor.

It is a first-in-class “soft” pan-BD BET inhibitor that is being developed to address diseases involving multiple, diverse inflammatory cell signaling pathways.

Our goal with the VYN201 program is to develop a therapy that delivers a potent, localized anti-inflammatory effect and is rapidly cleared through the body’s metabolic process so as to avoid systemic absorption.

To date, we have conducted several preclinical models which have demonstrated VYN201's anti-fibrotic activity and the ability to significantly reduce the expression of certain cytokines relevant to certain autoimmune diseases.

Our goal with the VYN201 program is to develop a therapy that delivers a potent, localized anti-inflammatory effect and is rapidly cleared through metabolic processes so as to avoid systemic absorption.

To date, we have conducted several preclinical studies which have demonstrated VYN201's anti-fibrotic and anti-inflammatory activity and the ability to significantly reduce the expression of certain cytokines relevant to certain autoimmune diseases.

Based on such data, we believe VYN201 has the potential to be highly versatile by serving as a locally acting therapy with low systemic exposure.

We are continuing to evaluate VYN201 in a variety of preclinical models and will announce an initial indication for VYN201 following such evaluation.

The following summarizes preclinical data received to date for the VYN201 program:

Th17 Inflammation Model

In October 2021, we announced preclinical data showing that VYN201 significantly reduced the expression of several key pro-inflammatory cytokines relevant to Th17-mediated autoimmune diseases in an animal model and an ex vivo human tissue study.

The pathogenesis of many autoimmune diseases is linked to the proliferation and activity of Th17 cells.

VYN201 was evaluated in a well-established preclinical model in which dorsal depilated mice were topically dosed with imiquimod cream to induce a Th17 inflammation pathology over a 7-day induction phase.

A further 7-day treatment phase evaluated three doses of VYN201 (0.001%, 0.01% and 0.1% concentrations) compared to a class 1 super-potent glucocorticosteroid product positive control (clobetasol propionate 0.05% cream) and vehicle control.

Further, an imiquimod-naive control group (healthy control group) was included for VYN201 vehicle treatment.

Key findings from the study include:

• A dose-dependent improvement in the signs and symptoms of inflammation was observed for VYN201 treatment groups.

◦ Treatment with VYN201 0.1% resulted in a 94% reduction in the composite inflammation severity score of erythema and scaling, relative to the vehicle control group at treatment day 7.

◦ Animals treated with VYN201 0.1% experienced a reduction in inflammation comparable to those treated with the class 1 super-potent glucocorticosteroid clobetasol propionate 0.05% cream.

◦ Corresponding dose-dependent reductions were observed across all treatment groups in Th17-relevant cytokine biomarkers of inflammation, including IL-1β, IL-17, IL-6, IL-36 and TNFα for VYN201-treated animals.

• Treatment with VYN201 at all concentrations appeared well-tolerated based on the following observations:

◦ Animals treated with VYN201 continued to gain body weight in a similar manner to the healthy control group, whereas animals treated with clobetasol propionate cream 0.05% had a mean body weight loss of approximately 17% compared to the animals treated with VYN201 0.1%.

◦ Animals treated with VYN201 had no evidence of dermal tolerance issues, consistent with the healthy control group, whereas animals treated with clobetasol propionate 0.05% cream had significant skin atrophy as evidenced by deep wrinkling and rhytides (fine wrinkles), marked dermal translucency and loss of elasticity.

Fibrotic Tissue Model

In November 2021, we announced preclinical data showing that VYN201 demonstrated improvements in reducing fibrotic tissue mass and overall skin repair outcomes with no negative impact on healing time.

In the preclinical study, duplicate identical skin incisions were induced on the flanks of hairless mice under anesthesia.

The animals were topically dosed once daily with either 100mg VYN201 vehicle, VYN201 1%, or a hydroalcoholic gel (a negative control known to delay healing) until each lesion had completely healed.

Key findings from the study include:

• As early as treatment day 5, and consistent with the vehicle control, animals treated with VYN201 1% had a statistically significant decrease (improvement) in global external lesion severity score, a comprehensive evaluation of length, width, swelling and visibility of lesions, compared to those treated with hydroalcoholic gel.

• Consistent with the vehicle control, lesions treated with VYN201 1% completely healed (mean time to heal:

15.5 days) approximately 5 days earlier compared to those treated with hydroalcoholic gel (mean time to heal:

• Animals treated with VYN201 1% had a significantly lower global internal lesion severity score than those treated with VYN201 vehicle or hydroalcoholic gel, indicative of an improved internal lesion outcome and a positive effect on reducing the formation of fibrotic tissue mass in the lesion bed.

• By the end of treatment, healed lesions treated with VYN201 1% appeared less visually distinct and more macular in nature with an improved overall aesthetic outcome compared to the other treatments.

• VYN201 vehicle and VYN201 1% appeared to be well-tolerated both within the lesion sites, based on the absence of irritation, and in general throughout the treatment period.

Vitiligo Model

Phase 1a/b Clinical Trial in Nonsegmental Vitiligo

Vitiligo is a chronic autoimmune depigmenting disorder of the skin, characterized by the loss of pigment producing cells known as melanocytes.

Vitiligo is the most common depigmenting skin condition, with a prevalence estimated at 0.5-2% of the world population.

It is estimated that there are at least 1.9 million patients diagnosed with vitiligo in the United States, with the majority of patients (approximately 90%) suffering from nonsegmental vitiligo.

There is currently only one FDA-approved product for the treatment of nonsegmental vitiligo which includes a black box safety warning.

Based on preclinical data generated to date, we believe that VYN201 has the potential to offer a targeted, safe and more efficacious treatment option that lowers the disease recurrence rate and is effective for all skin tones and scar types.

In November 2022, we announced the commencement of a Phase 1a/b clinical trial evaluating VYN201 for the treatment of nonsegmental vitiligo.

The Phase 1a/b clinical trial is being conducted in U.S.-based clinical centers.

In the Phase 1a portion of the clinical trial, single ascending and multiple ascending doses of VYN201 were applied topically once daily to 30 healthy volunteers in five dose cohorts for two weeks with a one-week safety follow-up visit to evaluate the safety, tolerability and pharmacokinetics of VYN201.

Evaluated doses included VYN201 0.025%, 0.1%, 0.5%, 1.0% and 2.0% ointment strengths.

There were no serious adverse events and no dose adjustments were required.

There were no clinically relevant treatment

emergent adverse events, abnormal clinical laboratory results or electrocardiogram findings.

No healthy volunteers withdrew from the trial for any reason.

Based on these results, we selected 0.5%, 1.0% and 2.0% ointment strengths for evaluation in the ongoing Phase 1b trial evaluating VYN201 in nonsegmental vitiligo patients.

In January 2023, we dosed the first vitiligo patient in the Phase 1b portion of the Phase 1 trial.

In the Phase 1b portion, up to 30 patients with a clinical diagnosis of nonsegmental vitiligo will receive VYN201 once daily for up to 16 weeks in three dose cohorts.

Exploratory efficacy of VYN201 in nonsegmental vitiligo patients will be assessed, including pharmacodynamic biomarkers and photography.

We expect topline results for the Phase 1b portion of the trial in mid-2023.

Vitiligo Preclinical Model

In March 2022, we announced positive preclinical data in an ex vivo skin model of vitiligo.

In the preclinical model, VYN201 reduced the expression of key pro-inflammatory biomarkers relevant to the pathogenesis of vitiligo, and demonstrated marked reduction in melanocyte loss.

The objectives of this study were to evaluate the potential of VYN201 to (i) reduce Matrix Metalloproteinase-9 (“MMP-9”) secretion (reducing the secretion of MMP-9 allows for melanocyte stabilization and limits loss of melanocytes/depigmentation in vitiligo);

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(iii) minimize the loss of melanocytes by assessing melanin pigment content and (iv) affect the expression of genes commonly associated with melanogenesis (melanin synthesis, melanosome maturation and transport).

Key findings from the study include:

• VYN201 produced a dose dependent reduction in MMP-9 and soluble E-cadherin:

◦ Applications with VYN201 at each of the 0.1% and 1% concentrations resulted in statistically significant reductions in MMP-9 when compared to vehicle, with a 94.7% reduction in secreted MMP-9 for the VYN201 1% treatment (p<0.0001).

◦ Applications with VYN201 at each of the 0.1% and 1% concentrations resulted in statistically significant reductions in the release of soluble E-cadherin relative to vehicle, with a 32.6% reduction in soluble E-cadherin for the VYN201 1% concentration (p<0.01).

◦ VYN201 0.1% and 1% were both numerically superior to topical ruxolitinib cream, 1.5% in reducing the secretion of MMP-9 and soluble E-cadherin.

• VYN201 at each of the 0.1% and 1% concentrations substantially reduced the loss of melanin pigment in the basal layers of skin:

◦ Quantified melanin levels for VYN201 1% treated skin cultures were approximately 10-fold higher as compared to VYN201 vehicle treated skin cultures (p=0.03).

• VYN201 positively impacted the expression of several genes implicated in the pathogenesis of vitiligo:

◦ VYN201 0.1% and 1% resulted in a statistically significant reduction in the expression of inflammatory cytokines IL1-α and IL1-β relative to vehicle (VYN201 1%, p<0.0005).

These cytokines are well recognized as significant contributors to inflammation in vitiligo and their over-expression correlates with disease progression.

◦ VYN201 significantly upregulated the WNT signaling pathway at the 0.1% and 1% concentrations relative to vehicle, with a 10-fold increase observed at the 1% concentration (p<0.01).

The WNT family of proteins and its signaling pathway is recognized as an important indicator of melanocyte regeneration .

In the preclinical model, VYN201 reduced the expression of key pro-inflammatory biomarkers relevant to the pathogenesis of vitiligo, and demonstrated marked reduction in melanocyte loss.

Specifically, VYN201 produced a dose dependent reduction in MMP-9 and soluble E-cadherin and substantially reduced the loss of melanin pigment in the basal layers of skin at the 0.1% and 1% concentrations.

In addition, VYN201 significantly upregulated WNT16, a member of the WNT family of genes.

The WNT signaling pathway is known to be dysregulated in vitiligo and is believed to play a key role in melanocyte regeneration.

Th17 Inflammation Preclinical Model

Data suggests that T helper 17 (Th17) cells play an important role in the pathogenesis of a diverse group of immune-mediated diseases, including psoriasis, rheumatoid arthritis, multiple sclerosis, inflammatory bowel disease, and asthma, among others.

In October 2021, we evaluated the impact of VYN201 on Th17 mediated inflammation in a well-established preclinical animal model and an ex vivo human tissue study.

In the animal model, depilated mice were topically dosed with imiquimod cream to induce a Th17 inflammation pathology over a 7-day induction phase.

Further, an imiquimod-naive control group (healthy control group) was included for VYN201 vehicle treatment.

VYN201 significantly reduced the expression of several key pro-inflammatory cytokines relevant to Th17-mediated autoimmune diseases in the animal model and the ex vivo human tissue study.

A dose-dependent improvement in the signs and symptoms of inflammation was observed for VYN201 treatment groups and treatment with VYN201 at all concentrations was well-tolerated.

Fibrotic Tissue Preclinical Model

In November 2021, we announced results from a preclinical animal model in which we evaluated VYN201's ability to reduce fibrosis.

In the preclinical study, duplicate identical skin incisions were induced on the flanks of hairless mice under anesthesia.

The animals were topically dosed once daily with either 100mg VYN201 vehicle, VYN201 1%, or a hydroalcoholic gel (a negative control known to delay healing) until each lesion had completely healed.

VYN201 demonstrated improvements in reducing fibrotic tissue mass and overall skin repair outcomes with no negative impact on healing time.

Animals treated with VYN201 1% had a statistically significant decrease (improvement) in global external lesion severity score, a comprehensive evaluation of length, width, swelling and visibility of lesions, compared to those treated with hydroalcoholic gel, consistent with the vehicle control.

In addition, animals treated with VYN201 1% had a significantly lower global internal lesion severity score than those treated with VYN201 vehicle or hydroalcoholic gel, indicative of an improved internal lesion outcome and a positive effect on reducing the formation of fibrotic tissue mass in the lesion bed.

Rheumatoid Arthritis Preclinical Model

In March 2022, we announced preclinical data showing that intra-articular injections of VYN201 resulted in significant inhibition of inflammation in a validated animal model of rheumatoid arthritis.

In the preclinical study, inflammatory arthritis was induced in BALB/c mice by systemically injecting a mixture of four arthritogenic monoclonal antibodies against collagen II at day 1.

In addition, the mice received a lipopolysaccharide injection systemically at day 4 to stimulate an acute systemic inflammatory response.

Each treatment group (n=7 per group) was injected with either (i) an intra-articular dose of VYN201 vehicle, (ii) an intra-articular dose of VYN201, (iii) an intra-articular dose of dexamethasone (1 mg/kg) or (iv) a systemic dose of dexamethasone (1 mg/kg, via intraperitoneal injection).

The intra-articular doses were administered on days 0, 3, 6 and 9 while the dexamethasone systemic injections were given daily beginning at day 0 through 11.

For the VYN201 treatment groups, four doses of VYN201 were evaluated (at concentrations ranging from 0.01 to 10 mg/kg).

Each animal treated with the

intra-articular injections received the injection in the ankle of one rear paw.

The untreated rear paw was assessed to evaluate any potential anti-inflammatory systemic effect.

Treatment response was evaluated based on an assessment of paw thickening or swelling (in millimeters) and arthritis scoring based on a five-point composite severity scale of redness, swelling of the ankles and wrists, and paw thickness.

Scoring in this model ranges from 0 (normal) to 4 (extensive signs and symptoms of arthritis).

VYN201 demonstrated marked inhibition of paw thickening at the 1 and 10 mg/kg doses.

At both doses, the inhibition of paw thickening was statistically significant in the treated paw relative to the untreated rear paw on day 12 (p<0.01).

In addition, limbs treated with VYN201 at the 1 and 10 mg/kg dose levels had an average arthritis score of 0.57 and 0.67, respectively, or near normal.

The arthritis score was significantly lower in the treated paw at both doses relative to the non-treated paws on day 12 (p<0.05).

VYN202 - Selective BET Inhibitor

VYN202 is exploring multiple BET inhibitor compounds that are highly selective for bromodomain 2 ("BD2").

By selectively inhibiting BD2, we believe VYN202 could have a more targeted anti-inflammatory effect with an improved benefit/risk profile.

We are diligently working with In4Derm to develop a lead molecule for the VYN202 program.

Once a lead candidate has been selected, we intend to exercise our option with respect to these BET inhibitor compounds and commence an IND-enabling preclinical safety program.

See "—Development and License Agreements—In4Derm License Agreements."

We are currently evaluating several BD2-selective oral small molecule BET inhibitors for our VYN202 program.

Systemic BET inhibitors have historically targeted both BD1 and BD2 less selectively, causing gastrointestinal and hematologic toxicities, such as thrombocytopenia.

The compounds that we are currently evaluating for our VYN202 program are being designed to potentially reduce the therapeutic limiting toxicities of BRD4 BET inhibitors currently in development by optimizing BD2 versus BD1 selectivity.

By maximizing BD2 selectivity, we believe VYN202 has the potential to present a more conveniently-administered non-biologic treatment option for both acute control and chronic management of immuno-inflammatory indications, where the damaging effects of unrestricted inflammatory signaling activity is common.

Following the receipt of positive results from our preclinical activities evaluating these compounds, we intend to exercise our option with respect to the oral molecules.

See "—Development and License Agreements—Agreements with Tay Therapeutics" for additional information.

FMX114 is our proprietary investigational combination gel formulation of tofacitinib and fingolimod that is designed to address both the source and cause of inflammation in atopic dermatitis ("AD").

On August 10, 2022, we announced that our Phase 2a clinical trial evaluating the safety and efficacy of FMX114 for mild-to-moderate AD did not meet its primary endpoint, which was based on assessments of the absolute and percent change relative to baseline in the atopic dermatitis severity index (“ADSI”) scoring assessment at week 4.

In the weeks that followed, we performed additional analyses which showed that while efficacy results for FMX114 were not statistically significant at week 4, FMX114 was statistically superior to vehicle at weeks 1, 2 and 3 in the Phase 2a trial.

Additionally, data received from the two-week open label extension during which both AD lesions of participating patients were treated with FMX114 showed that efficacy results continued to develop beyond week 4 of the trial and that the separation of treatment effect for lesions treated with FMX114 as compared to lesions treated with vehicle increased for lesions that had a higher ADSI score at baseline.

Accordingly, we believe that FMX114 may have an improved overall treatment effect on patients with more severe disease at baseline and that FMX114 may have increased potential to effectively treat patients with more moderate-to-severe AD.

We are evaluating partnering opportunities for this program and intend to focus our resources on the BET inhibitor development programs.

Divestiture of Minocycline Business

On January 12, 2022, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Journey Medical Corporation (“Journey”) pursuant to which we divested our Molecule Stabilizing Technology ("MST") franchise, including AMZEEQ, ZILXI, and FCD105, to Journey (the “Sale”).

Journey acquired, among other things, the intellectual property related to the MST assets, inventory as of closing, and our rights and obligations under the license agreement with respect to the greater China territory.

In addition, Journey agreed to assume certain liabilities, including, among others, those arising from ourpatent infringement suit initiated against Padagis Israel Pharmaceuticals Ltd.

The Sale was consummated concurrently with the execution of the Purchase Agreement.

Pursuant to the Purchase Agreement, we received an upfront payment of $20.0 million and we are entitled to an additional $5.0 million on the one-year anniversary of the closing of the transaction.

On January 12, 2022, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Journey Medical Corporation (“Journey”) pursuant to which we divested our Molecule Stabilizing Technology franchise ("MST Franchise"), including AMZEEQ, ZILXI, and FCD105, to Journey (the “Sale”).

Pursuant to the Purchase Agreement, we received an upfront payment of $20.0 million and an additional $5.0 million on January 12, 2023, the one-year anniversary of the closing of the transaction.

We are also eligible to receive sales milestone payments of up to $450.0 million in the aggregate upon the achievement of specified levels of net sales on a product-by-product basis, beginning with annual net sales exceeding $100,000,000 (with products covered in three categories (1) AMZEEQ (and certain modifications), (2) ZILXI (and certain modifications), and (3) FCD105 and other products covered by the patents being transferred, including certain modifications).

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We currently have no plans to establish our own manufacturing capabilities and plan to continue to rely on third-party manufacturers for any future trials of our product candidates.

We, together with our contract manufacturing organizations, or CMOs, have developed the validation processes, methods, tests and/or controls suitable for the manufacturing of our product candidates and for defining their properties.

Development stage

quantities of any products that we develop need to be manufactured in facilities, and by processes, that comply with the requirements of the FDA and the regulatory agencies of other jurisdictions in which we may seek approval.

We, together with our contract manufacturing organizations ("CMOs") have developed the validation processes, methods, tests and/or controls suitable for the manufacturing of our product candidates and for defining their properties.

Development stage quantities of any products that we develop need to be manufactured in facilities, and by processes, that comply with the requirements of the FDA and the regulatory agencies of other jurisdictions in which we may seek approval.

We require all of our CMOs to comply with these requirements and currently employ internal and external resources to manage our manufacturing contractors.

The relevant manufacturers of our product candidates for our current preclinical and clinical trials have advised us that they are compliant with both the FDA’s Good Laboratory Practices, or GLP, and cGMP.

Development and License Agreements

In4Derm License Agreements

On April 30, 2021, we entered into an Evaluation and Option Agreement (the “Option Agreement”) with In4Derm.

In4Derm is a spin-out of the University of Dundee’s School of Life Sciences and has discovered and is developing proprietary BET inhibitors for the treatment of immunology and oncology conditions.

Pursuant to the Option Agreement, In4Derm granted us an exclusive option to obtain certain exclusive worldwide rights to research, develop and commercialize products containing In4Derm’s BET inhibitor compounds for the treatment of any disease, disorder or condition in humans.

Pursuant to the Option Agreement, we agreed to use commercially reasonable efforts to stabilize, develop and manufacture a product with a pan-BD BET inhibitor as its active ingredient and In4Derm agreed to provide a mutually agreed data package and select an NCE development candidate from its highly selective BET inhibitor compounds (the "Oral BETi Compounds").

The Company paid a $1.0 million non-refundable cash payment to In4Derm upon execution of the Option Agreement, 50% of which was to be used by In4Derm in the development of the Oral BETi Compounds.

Agreements with Tay Therapeutics

On April 30, 2021, we entered into an Evaluation and Option Agreement (the “Option Agreement”) with Tay.

Tay is a spin-out of the University of Dundee’s School of Life Sciences and has discovered and is developing proprietary BET inhibitors for the treatment of immunology and oncology conditions.

Pursuant to the Option Agreement, Tay granted us an exclusive option to obtain certain exclusive worldwide rights to research, develop and commercialize products containing Tay’s BET inhibitor compounds for the treatment of any disease, disorder or condition in humans.

Pursuant to the Option Agreement, we agreed to use commercially reasonable efforts to stabilize, develop and manufacture a product with a pan-BD BET inhibitor as its active ingredient and Tay agreed to provide a mutually agreed data package and select an NCE development candidate from its highly selective BET inhibitor compounds (the "Oral BETi Compounds").

We paid a $1.0 million non-refundable cash payment to Tay upon execution of the Option Agreement, 50% of which was to be used by Tay in the development of the Oral BETi Compounds.

Locally Administered Pan-BD BET Inhibitor Program (VYN201)

On August 6, 2021, we exercised our option with respect to the VYN201 program and, on August 9, 2021, the parties entered into a License Agreement (the “License Agreement”) granting VYNE a worldwide, exclusive license that is sublicensable through multiple tiers to exploit certain of In4Derm’s pan-BD BET inhibitor compounds.

On August 6, 2021, we exercised our option with respect to the VYN201 program and, on August 9, 2021, the parties entered into a License Agreement (the “VYN201 License Agreement”) granting VYNE a worldwide, exclusive license that is sublicensable through multiple tiers to exploit certain of Tay’s pan-BD BET inhibitor compounds.

We have the sole responsibility for development, regulatory, marketing and commercialization activities to be conducted for the licensed products at our sole cost and discretion.

We are required to use commercially reasonable efforts to develop and, if approved, commercialize such products.

Pursuant to the License Agreement, a joint development committee consisting of one representative from each party reviews the progress of the development plan for the licensed products.

Pursuant to the License Agreement, we may develop a product that contains or incorporates a specific BET inhibitor, whether alone or in combination with other active ingredients, in any form, formulation, presentation, or dosage, and for any mode of administration.

We made a $0.5 million cash payment to In4Derm in connection with entering into the License Agreement.

Pursuant to the License Agreement, we have agreed to make cash payments of up to an aggregate of $15.75 million upon the achievement of specified clinical development and regulatory approval milestones with respect to each licensed product in the U.S.

In4Derm is entitled to additional milestones upon the achievement of regulatory approvals in certain jurisdictions outside the U.S.

In addition, with respect to any products we commercialize under the License Agreement, we will pay tiered royalties to In4Derm on net sales of such licensed products by us, our affiliates, or sublicensees, of 5%, 7.5% and 10% based on tiered annual net sales bands subject to specified reductions.

Pursuant to the VYN201 License Agreement, a joint development committee consisting of one representative from each party reviews the progress of the development plan for the licensed products.

Pursuant to the VYN201 License Agreement, we may develop a product that contains or incorporates a specific BET inhibitor, whether alone or in combination with other active ingredients, in any form, formulation, presentation, or dosage, and for any mode of administration.

We made a $0.5 million cash payment to Tay in connection with entering into the VYN201 License Agreement.

Pursuant to the VYN201 License Agreement, we have agreed to make cash payments to Tay upon the achievement of specified clinical development and regulatory approval milestones with respect to each licensed topical product in the United States of up to $15.75 million for all indications.

Tay is entitled to additional milestones upon the achievement of regulatory approvals in certain jurisdictions outside the U.S.

In addition, with respect to any products we commercialize under the VYN201 License Agreement, we will pay tiered royalties to Tay on net sales of such licensed products by us, our affiliates, or sublicensees, of 5%, 7.5% and 10% based on tiered annual net sales bands subject to specified reductions.

We are obligated to pay royalties until the later of (1) the tenth anniversary of the first commercial sale of the relevant licensed product, (2) the expiration of the last valid claim of the licensed patent rights covering such licensed product in such country and (3) the expiration of regulatory exclusivity for the relevant licensed product in the relevant country, on a licensed product-by-licensed product and country-by-country basis.

Selective BET Inhibitor Program (VYN202)

Under the terms of the Option Agreement, we can exercise our option with respect to the Oral BETi Compounds at any time until it expires upon the earlier of (i) 14 days following the delivery of an agreed data package and selection of a lead NCE candidate by In4Derm and (ii) June 30, 2022.

We expect to exercise our option following the selection of a lead candidate for the program.

Upon exercise of the option, the parties will sign a license agreement (the “Oral License Agreement”) and we will pay In4Derm a $4.0 million cash payment.

The Oral License Agreement will include cash payments payable to In4Derm of up to an aggregate of $43.75 million upon the achievement of specified clinical development and regulatory approval milestones with respect to each licensed oral product in the U.S.

In4Derm is entitled to additional milestones upon the achievement of regulatory approvals in certain jurisdictions outside the U.S.

In addition, with respect to any products we commercialize under the Oral License Agreement, we will pay tiered royalties to In4Derm on net sales of such licensed products by us, our affiliates, or sublicensees, of 5%, 7.5% and 10% based on tiered annual net sales bands subject to specified reductions.

Under the Option Agreement, we have an exclusive option (the “Option”) to obtain certain exclusive worldwide rights to research, develop and commercialize products containing Tay’s Oral BETi Compounds.

Under the original terms of the Option Agreement, the Option was to expire upon the earlier of (i) 14 days following the delivery of an agreed data package and selection of a lead candidate by In4Derm and (ii) June 30, 2022 (the “Option Term”).

On June 15, 2022, the parties entered into a letter agreement to extend the Option Term to February 28, 2023.

We recently informed Tay that we require additional preclinical data in order to complete our assessment of the Oral BETi Compounds.

In consideration of the significant progress made by the parties and our desire to maintain optionality with respect to our right to exercise the Option for the Oral BETi Compounds, the parties entered into a Letter Agreement on February 27, 2023 (the “Letter Agreement”) to extend the Option Term to April 30, 2023.

Pursuant to the terms of the Letter Agreement, we agreed to pay Tay a non-refundable fee in the

amount of $250,000 to extend the Option Term.

This fee will be deducted from the $4.0 million payable to Tay in the event that we exercise the Option pursuant to the Option Agreement.

In the event that we exercise the Option, the parties will sign a license agreement (the “Oral License Agreement”) and we will pay Tay a $4.0 million upfront cash payment, less the amount paid pursuant to the Letter Agreement.

The Oral License Agreement will include cash payments of up to $43.75 million payable to Tay upon the achievement of specified clinical development and regulatory approval milestones with respect to each licensed oral product in the United States for all indications.

Tay will be entitled to additional milestones upon the achievement of regulatory approvals in certain jurisdictions outside the U.S.

In addition, with respect to any products we commercialize under the Oral License Agreement, we will pay tiered royalties to Tay on net sales of such licensed products by us, our affiliates, or sublicensees, of 5%, 7.5% and 10% based on tiered annual net sales bands subject to specified reductions.

LEO Pharma A/S for Finacea® Foam

In September 2015, Bayer HealthCare AG, or Bayer, began selling in the United States a product branded Finacea® Foam, based on our legacy foam technology.

Finacea is a prescription topical drug which was developed through a collaboration between Foamix and Bayer.

In September 2015, Bayer HealthCare AG ("Bayer") began selling in the United States a product branded Finacea® Foam, based on our legacy foam technology.

Finacea is a prescription topical drug which was developed through a collaboration between Foamix (our predecessor) and Bayer.

Bayer sold the product to LEO Pharma A/S ("LEO") in 2018.

Pursuant to our license agreement with LEO for Finacea, we are entitled to receive royalties on net sales of Finacea.

Pursuant to the license agreement with LEO for Finacea, we are entitled to receive royalties on net sales of Finacea.

In 2022, we received (or became entitled to receive) a total of $0.5 million in royalties from sales of Finacea from LEO.

Additional Research and Development

For the fiscal years ended December 31, 2021 and 2020, our research and development expenses totaled $25.0 million and $43.5 million, respectively.

In the ordinary course of business, we enter into agreements with third parties such as contract research organizations, or CROs, medical institutions, clinical investigators and contract laboratories, to conduct our clinical trials and aspects of our research and preclinical testing.

These CROs and other third parties provide us with project management, monitoring, regulatory consulting and investigative services, and their fees are part of our research and development expenses.

Intellectual Property

Our intellectual property and proprietary technology are essential to the development of our pipeline product candidates.

Our intellectual property and proprietary technology are essential to the development of our product candidates.

We are committed to protecting our intellectual property rights, core technologies and other know-how through a combination of patents, trademarks, domain names, trade dress, trade secrets, copyrights, non-disclosure and confidentiality agreements, common interest agreements to protect privileged confidential information, licenses, assignments of invention and other contractual arrangements with our employees, scientific advisors, consultants, partners, suppliers, customers and others.

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It is uncertain whether the issuance of any third party patent would require us to alter our development strategies, alter our processes, obtain licenses or cease certain activities.

Our breach of any license agreements or failure to obtain a license to proprietary rights that we may require to develop our current and future drugs may have a material adverse impact on us.

If third parties prepare and file patent applications in the United States that also claim technology to which we have rights, we may have to participate in interference or other proceedings in the United States Patent and Trademark Office, or USPTO, to determine priority of invention.

Our breach of any license agreements or failure to obtain a license to proprietary rights that we may require to develop our current and future product candidates may have a material adverse impact on us.

If third parties prepare and file patent applications in the United States that also claim technology to which we have rights, we may have to participate in derivation, interference or other proceedings in the United States Patent and Trademark Office ("USPTO") to determine derivation or priority of invention.

We may also have to participate in court proceedings or arbitration to defend and assert our rights.

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Risk Factors—Risks Related to Our Intellectual Property."

We have various pending patent applications related to our FMX114 and VYN201 product candidates.

We have PCT applications in relation to FMX114.

Our patent portfolio in relation to our BETi programs includes pending compound and composition patent applications in various jurisdictions worldwide, owned or licensed by us.

Subject to filing a non-provisional, the PCT's being filed nationally, and the pending patent applications being granted and payments of the appropriate maintenance fees, the patent applications related to FMX114 will expire in 2040 and 2041 and the patent applications in relation to VYN201 will expire in 2040 and 2042.

Our patent portfolio in relation to our VYN201 BET inhibitor program includes a granted patent in the UK and pending compound and composition patent applications in various jurisdictions worldwide that are licensed by us.

In addition, we have filed a PCT application directed to various uses thereof.

We have various non-provisional and nationally filed PCT patent applications pending in relation to FMX114 including applications filed in Australia, Brazil, Canada, Europe, Japan and the US.

Subject to filing a non-provisional, the PCT's being filed nationally, and the pending patent applications being granted (without terminal disclaimers) and payments of the appropriate maintenance fees, the patent applications in relation to VYN201 will expire in 2040 and 2042 and the patent applications related to FMX114 will expire in 2040, 2041 and 2043.

In addition, in connection with our legacy business, we have various granted patents worldwide owned or licensed by us related to pharmaceutical compositions and their uses, including various foam-based platforms, various gel-based platforms, and other technology.

Patents extend for varying periods according to the date of patent filing or grant and the legal term of patents in various countries where patent protection is obtained.

The actual protection afforded by a patent, which can vary from country to country, depends on the type of patent, the scope of its coverage and the availability of legal remedies in the country.

The actual protection afforded by a patent, which can vary from country to

country, depends on the type of patent, the scope of its coverage and the availability of legal remedies in the country.

In most countries in which we file, the patent term is 20 years from the earliest date of filing a non-provisional patent application.

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however, unlike in the United States, the European patent does not grant patent term adjustments.

The European Union does have a compensation

program similar to patent term extension called supplementary patent certificate that would effectively extend patent protection for up to five years.

The European Union does have a compensation program similar to patent term extension called supplementary patent certificate that would effectively extend the duration of protection of the product for up to five years.

Obtaining a patent term extension in the US or a supplementary patent certificate in the European Union is uncertain and will depend on eligibility and satisfying rigorous criteria in each jurisdiction.

Our drug development activities face, and will continue to face, intense competition from organizations such as pharmaceutical and biotechnology companies, as well as academic and research institutions and government agencies.

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These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and subject registration for clinical trials, as well as in acquiring technologies complementary to, or that may be necessary for, our development programs.

With respect to FMX114 as a potential treatment of mild-to-moderate AD, there are several different therapies in the AD market, including prescription products and OTC products.

Our primary competitors for this program include topical therapies such as Eucrisa, marketed by Pfizer Inc.;

For vitiligo, our primary competitors include topical therapies such as generic and branded versions of calcineurin inhibitors, including Elidel, marketed by Bausch Health;

Opzelura, marketed by Incyte Corporation;

and generic and branded versions of low to mid-potency steroids such as hydrocortisone and betamethasone.

In addition, there are several prescription product candidates under development that could potentially be used to treat AD, including but not limited to:

topical tapinarof and topical cerdulatinib, both under development by Dermavant Sciences, Inc., topical delgocitinib, under development by LEO Pharma A/S and Japan Tobacco, Inc.

(approved as Corectim in Japan), topical difamilast ointment, under development by Medimetriks/Otsuka Pharma, oral PF-04965842, under development by Pfizer Inc., and injectable lebrikizumab, under development by Eli Lilly and Company.

While we have not yet identified an initial indication for VYN201, there is intense competition for the treatment of immuno-inflammatory conditions, including indications we are currently evaluating.

branded and generic versions of high potency steroids, including Clobex, marketed by Galderma Laboratories, LP;

and other treatments including various lasers and ultraviolet light-based therapies.

In addition, there are several prescription product candidates under development that could potentially be used to treat vitiligo and compete with VYN201, including but not limited to:

topical cerdulatinib, under development by Dermavant Sciences, Inc., and both oral PF-06651600 and oral PF-06700841 under development by Pfizer Inc.

While we have not yet identified an initial indication for VYN202, there is intense competition for the treatment of immuno-inflammatory conditions.

VYN202, if approved, will compete with existing treatments and new treatments that may become available in the future.

The commercial opportunity for our drug candidates, if approved, could be reduced or eliminated if our competitors develop and commercialize drugs that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any drug we may develop.

Our competitors also may obtain FDA or other regulatory approval for their drug candidates more rapidly than us, which could result in our competitors establishing a strong market position before our drug candidates are able to enter the market.

The commercial opportunity for our product candidates, if approved, could be reduced or eliminated if our competitors develop and commercialize drugs that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any drug we may develop.

Our competitors also may obtain FDA or other regulatory approval for their product candidates more rapidly than us, which could result in our competitors establishing a strong market position before our product candidates are able to enter the market.

Government Regulation

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Review and approval of drugs

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA and implementing regulations.

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act ("FDCA") and implementing regulations.

In general, new drug products require the submission of a NDA and approval thereof by the FDA prior to being marketed in the United States.

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requirements at any time during the product development process, approval process or after approval may subject an applicant to a variety of administrative or judicial sanctions and enforcement actions brought by the FDA, the Department of Justice or other governmental entities.

Possible sanctions may include the FDA’s refusal to approve pending NDAs, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement and civil or criminal penalties.

Possible sanctions may include the FDA’s refusal to

approve pending NDAs, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement and civil or criminal penalties.

The process required by the FDA prior to marketing and distributing a new drug product in the United States generally involves the following:

• completion of laboratory tests, animal studies and formulation studies in compliance with the FDA’s Good Laboratory Practices, or GLP, or other applicable regulations;

• submission to the FDA of an application for an investigational new drug application, or IND, which must become effective before human clinical trials may begin;

• approval by an independent institutional review board, or IRB, at each clinical site before each trial may be initiated at that site;

• performance of adequate and well-controlled human clinical trials in accordance with Good Clinical Practice, or GCP, requirements to establish the safety and efficacy of the proposed drug for its intended use;

• completion of laboratory tests, animal studies and formulation studies in compliance with the FDA’s GLP or other applicable regulations;

• submission to the FDA of an application for an IND which must become effective before human clinical trials may begin;

• approval by an independent institutional review board ("IRB") at each clinical site before each trial may be initiated at that site;

• performance of adequate and well-controlled human clinical trials in accordance with Good Clinical Practice ("GCP") requirements to establish the safety and efficacy of the proposed drug for its intended use;

• preparation and submission to the FDA of a NDA or supplemental NDA;

• satisfactory completion of an FDA advisory committee review, if applicable;

• satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product or components thereof are produced, to assess compliance with current Good Manufacturing Good Practices, or cGMP, and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity;

• satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product or components thereof are produced, to assess compliance with cGMP and to assure that the facilities, methods and controls are adequate to preserve the drug’s identity, strength, quality and purity;

• satisfactory completion of FDA audits of clinical trial sites and the sponsor’s clinical trial records to assure compliance with GCPs and the integrity of the clinical data;

• payment of user fees and FDA review and approval of the NDA;

• compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy, or REMS, and the potential requirement to conduct post-approval studies.

• compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy ("REMS") and the potential requirement to conduct post-approval studies.

Preclinical studies

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The results of the preclinical studies and clinical trials, together with other detailed information, including information on the manufacture, control and composition of the product, are submitted to the FDA as part of a NDA requesting approval to market the product candidate for a proposed indication.

Under the Prescription Drug User Fee Act, or PDUFA, as amended, applicants are required to pay fees to the FDA for reviewing an NDA.

Under the Prescription Drug User Fee Act ("PDUFA") as amended, applicants are required to pay fees to the FDA for reviewing an NDA.

These user fees, as well as the annual fees required for commercial manufacturing establishments and for approved products, can be substantial.

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The purpose of these programs is to provide important new drugs to patients earlier than under standard FDA review procedures.

Under the fast track program, the sponsor of a new drug candidate may request that FDA designate the drug candidate for a specific indication as a fast track drug concurrent with, or after, the filing of the IND for the drug candidate.

Under the fast track program, the sponsor of a new product candidate may request that FDA designate the product candidate for a specific indication as a fast track drug concurrent with, or after, the filing of the IND for the product candidate.

Fast track designation provides opportunities for frequent interactions with the FDA review team to expedite development and review of the product.

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Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints.

A drug candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint.

A product candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint.

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

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

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

Once a NDA is submitted for a product intended to treat a serious condition, the FDA may assign a priority review designation if FDA determines that the product, if approved, would provide a significant improvement in safety or effectiveness.

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

The Hatch-Waxman Act

Section 505 of the FDCA describes three types of applications that may be submitted to request marketing authorization for a new drug.

A 505(b)(1) NDA is an application that contains full reports of investigations of safety and effectiveness.

The Hatch-Waxman Act created two additional marketing pathways under Sections 505(j) and 505(b)(2) of the FDCA.

Section 505(j) establishes an abbreviated approval process for generic versions of approved drug products through the submission of an abbreviated new drug application, or ANDA.

An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the branded reference drug and has been shown to be bioequivalent to the branded reference drug.

ANDA applicants are required to conduct bioequivalence testing to confirm chemical and therapeutic equivalence to the branded reference drug.

Generic versions of drugs can often be substituted by pharmacists under prescriptions written for the branded reference drug.

In addition, an applicant may submit a NDA under Section 505(b)(2) of the FDCA.

Section 505(b)(2) was enacted as part of the Hatch-Waxman Amendments and permits the filing of a NDA where at least some of the information required for approval comes from FDA’s conclusions of safety or efficacy from studies or trials not conducted by or for the applicant, and for which the applicant has not received a right of reference.

If the 505(b)(2) applicant can establish that reliance on the FDA’s previous findings of safety and effectiveness is scientifically appropriate, it may eliminate the need to conduct certain preclinical studies or clinical trials of the new product.

The FDA may also require companies to perform additional studies or measurements, including clinical trials, to support the change from the approved reference, or “listed” drug.

The FDA may then approve the new product candidate for all, or some, of the label indications for which the reference drug has been approved, as well as for any new indication sought by the 505(b)(2) applicant.

Notwithstanding the approval of many products by the FDA pursuant to Section 505(b)(2), over the last few years, some pharmaceutical companies and others have objected to the FDA’s interpretation of Section 505(b)(2).

If the FDA changes its interpretation of Section 505(b)(2), or if the FDA’s interpretation is successfully challenged in court, this could delay or even prevent the FDA from approving any Section 505(b)(2) NDA that we submit.

The Orange Book

In seeking approval for a drug through a NDA, applicants are required to list with the FDA each patent whose claims cover the applicant’s product.

Upon approval of a drug, each of the patents listed in the application for the drug is then published in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book.

Drugs listed in the Orange Book can, in turn, be cited by potential generic competitors in support of approval of an ANDA.

An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug and has been shown through bioequivalence testing to be bioequivalent to the listed drug.

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

In some cases however, the FDA may issue product specific guidance that recommends the conduct of a clinical trial.

Drugs approved in this way are considered to be therapeutically equivalent to the listed drug, are commonly referred to as “generic equivalents” to the listed drug, and can often be substituted by pharmacists under prescriptions written for the original listed drug in accordance with state law.

To the extent that a Section 505(b)(2) NDA relies on clinical trials conducted for a previously approved drug product or the FDA’s prior findings of safety and effectiveness for a previously approved drug product, the Section 505(b)(2) applicant must submit patent certifications in its Section 505(b)(2) application with respect to any patents for the previously approved product on which the applicant’s application relies that are listed in the Orange Book.

Specifically, the applicant must certify for each listed patent that, in relevant part, (i) the required patent information has not been filed;

(ii) the listed patent has expired;

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

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

A certification that the new product will not infringe the previously approved product’s listed patent or that such patent is invalid or unenforceable is known as a Paragraph IV certification.

If the applicant does not challenge one or more listed patents through a Paragraph IV certification, the FDA will not approve the Section 505(b)(2) NDA application until all the listed patents claiming the referenced product have expired.

Further, the FDA will also not approve, as applicable, a Section 505(b)(2) NDA application until any non-patent exclusivity, such as, for example, five-year exclusivity for obtaining approval of a new chemical entity, three-year exclusivity for an approval based on new clinical trials, and additional 6 months pediatric exclusivity if applicable, listed in the Orange Book for the referenced product, has expired.

If a generic drug product is ready for approval before the expiration of any patents or exclusivities accorded to the reference listed drug product, the FDA issues a tentative approval letter to the applicant.

The tentative approval letter details the circumstances associated with the tentative approval.

The FDA delays final approval of the generic drug product until all patent or exclusivity issues have been resolved.

A tentative approval does not allow the applicant to market the generic drug product.

If the Section 505(b)(2) NDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the owner of the referenced NDA for the previously approved product and relevant patent holders within 20 days after the Section 505(b)(2) NDA has been accepted for filing by the FDA.

The NDA and patent holders may then initiate a patent infringement suit against the Section 505(b)(2) applicant.

Under the FDCA, the filing of a patent infringement lawsuit within 45 days of receipt of the notification regarding a Paragraph IV certification automatically prevents the FDA from approving the Section 505(b)(2) NDA until the earliest to occur of 30 months beginning on the date the patent holder receives notice, expiration of the patent, settlement of the lawsuit, or until a court deems the patent unenforceable, invalid or not infringed.

Even if a patent infringement claim is not brought within the 45-day period, a patent infringement claim may be brought under traditional patent law, but it does not invoke the 30-month stay.

Moreover, in cases where a Section 505(b)(2) application containing a Paragraph IV certification is submitted after the fourth year of a previously approved drug’s five-year exclusivity period and the patent holder brings suit within 45 days of notice of certification, the 30-month period is automatically extended to prevent approval of the Section 505(b)(2) application until the date that is seven and one-half years after approval of the previously approved reference product.

The court also has the ability to shorten or lengthen either the 30 month or the seven and one-half year period if either party is found not to be reasonably cooperating in expediting the litigation.

Marketing Exclusivity

In addition to patent protections applicable to a listed drug, a Section 505(b)(1) application and a 505(b)(2) application may be subject to periods of statutory market exclusivity afforded to an approved new drug.

Statutory market exclusivity provides the holder of an approved NDA limited protection from new competition in the marketplace for the innovation represented by its approved drug product, and precludes approval of certain 505(b)(2) and abbreviated new drug applications (ANDAs) referencing the approved drug product for prescribed periods of time.

Exclusivity is available for new chemical entities, as well as for significant changes in already approved drug products, such as a new indication or new use.

FDA may refuse to approve a Section 505(b)(2) or ANDA application that is referencing a previously approved drug product to the extent that the drug product is subject to market exclusivity.

Upon NDA approval of a new chemical entity or NCE, which is a drug that contains no active moiety that has been approved either alone or in combination by the FDA in any other NDA, that drug receives five years of marketing exclusivity and during which time the FDA cannot receive any ANDA or 505(b)(2) application seeking approval of a drug that references a version of the NCE drug, except that such applications may be submitted after 4 years if they contain a certification of patent invalidity or noninfringement.

Certain approvals granted for change(s) to a drug resulting from new clinical studies that were “essential to approval,” such as a new dosage form, strength, route of administration, dosing regimen or indication, are associated with a three-year period of exclusivity.

During this three-year exclusivity, the FDA cannot approve an ANDA or 505(b)(2) application that includes the change(s).

Such applicants must also demonstrate “a significant new use” such as a new indication for a previously approved drug, and not just refinements in labeling related to previously approved uses, in order to qualify for the three-year exclusivity.

Post-approval requirements

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Although physicians may prescribe legally available drugs for off-label uses, manufacturers may not encourage, market or promote such off-label uses.

As a result, “off-label promotion” has formed the basis for litigation under the Federal False Claims Act, or FCA, violations of which are subject to significant civil fines and penalties.

In addition, under the federal Physician Payments Sunshine Act, manufacturers of certain prescription products are required to disclose annually to the Centers for Medicaid and Medicare Services, or CMS payments or transfers of value made to “covered recipients” and teaching

hospitals, and ownership or investment interests held by covered recipients and their immediate family members.

As a result, “off-label promotion” has formed the basis for litigation under the Federal False Claims Act ("FCA") violations of which are subject to significant civil fines and penalties.

In addition, under the federal Physician Payments Sunshine Act, manufacturers of certain prescription products are required to disclose annually to the Centers for Medicare & Medicaid Services ("CMS") payments or transfers of value made to “covered recipients” and teaching hospitals, and ownership or investment interests held by covered recipients and their immediate family members.

Reportable payments and transfers of value may be direct or indirect, in cash or kind, for any reason, and are required to be disclosed even if the transfers are not related to an approved product.

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Even when not pursuing a pediatric indication, under the Pediatric Research Equity Act of 2003, an NDA or supplement thereto must contain data that are adequate to assess the safety and effectiveness of the drug product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective.

With enactment of the Food and Drug Administration Safety and Innovation Act, or the FDASIA, in 2012, sponsors must also submit pediatric trial plans prior to the assessment data.

With enactment of the Food and Drug Administration Safety and Innovation Act (the "FDASIA") in 2012, sponsors must also submit pediatric trial plans prior to the assessment data.

Those plans must contain an outline of the proposed pediatric trials the applicant plans to conduct, including trial objectives and design, any deferral or waiver requests, and other information required by regulation.

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Patent term extension cannot be used to extend the remaining term of a patent past a total of 14 years from the product’s approval date.

In other words, the total maximum patent life for the product with the patent extension cannot exceed 14 years from the products approval date, which amounts to 14 years of

potential marketing time.

In other words, the total maximum patent life for the product with the patent extension cannot exceed 14 years from the products approval date, which amounts to 14 years of potential marketing time.

Only one patent applicable to an approved drug product may be extended, and the application for the extension must be submitted prior to the expiration of the patent in question and within 60 days of FDA approval.

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Regulation in the European Economic Area

In the European Economic Area, or EEA, which is composed of the Member States of the European Union plus Norway, Iceland and Liechtenstein, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA.

In the European Economic Area ("EEA") which is composed of the Member States of the European Union plus Norway, Iceland and Liechtenstein, medicinal products can only be commercialized after obtaining a Marketing Authorization ("MA").

There are two types of MAs:

• The Community MA, which is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal Products for Human Use, or CHMP, of the European Medicines Agency, or EMA, and which is valid throughout the entire territory of the EEA.

• The Community MA, which is issued by the European Commission through the Centralized Procedure, based on the opinion of the Committee for Medicinal Products for Human Use ("CHMP") of the European Medicines Agency ("EMA") and which is valid throughout the entire territory of the EEA.

The Centralized Procedure is mandatory for certain types of products, such as biotechnology medicinal products, orphan medicinal products and medicinal products that contain a new active substance indicated for the treatment of AIDS, cancer, neurodegenerative disorders, diabetes, auto-immune and viral diseases.

The Centralized Procedure is optional for products containing a new active substance not yet authorized in the EEA, or for products that constitute a significant therapeutic, scientific or technical innovation or which are in the interest of public health in the EU.

Under the Centralized Procedure the maximum timeframe for the evaluation of a marketing authorization application, or MAA, is 210 days (excluding clock stops, when additional written or oral information is to be provided by the applicant in response to questions asked by the CHMP).

Under the Centralized Procedure the maximum timeframe for the evaluation of a marketing authorization application ("MAA") is 210 days (excluding clock stops, when additional written or oral information is to be provided by the applicant in response to questions asked by the CHMP).

Accelerated evaluation might be granted by the CHMP in exceptional cases, when the authorization of a medicinal product is of major interest from the point of view of public health and in particular from the viewpoint of therapeutic innovation.

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If the product has not received a National MA in any Member State at the time of application, it can be approved simultaneously in various Member States through the Decentralized Procedure.

Prior to obtaining an MA in the EEA, applicants have to demonstrate compliance with all measures included in a Pediatric Investigation Plan, or PIP, approved by the EEA regulatory agency, covering all subsets of the pediatric population, unless the EEA regulatory agency has granted (1) a product-specific waiver, (2) a class waiver or (3) a deferral for one or more of the measures included in the PIP.

Prior to obtaining an MA in the EEA, applicants have to demonstrate compliance with all measures included in a Pediatric Investigation Plan ("PIP") approved by the EEA regulatory agency, covering all subsets of the pediatric population, unless the EEA regulatory agency has granted (1) a product-specific waiver, (2) a class waiver or (3) a deferral for one or more of the measures included in the PIP.

In the EEA, upon receiving a MA, new chemical entities generally receive eight years of data exclusivity and an additional two years of market exclusivity.

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Some countries provide that drug products may be marketed only after a reimbursement price has been agreed.

Some countries may require the completion of additional studies or trials that compare the cost-effectiveness of a particular drug candidate to currently available therapies.

Some countries may require the completion of additional studies or trials that compare the cost-effectiveness of a particular product candidate to currently available therapies.

For example, the European Union provides options for its member states to restrict the range of drug products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use.

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Any country that has price controls or reimbursement limitations for drug products may not allow favorable reimbursement and pricing arrangements.

Healthcare laws and regulations

In March 2010, the then President of the United States signed one of the most significant healthcare reform measures in decades.

Healthcare Reform

In March 2010, the then President of the United States signed one of the most significant healthcare reform measures in decades, the ACA.

The ACA substantially changed the way healthcare is financed by both governmental and private insurers, and significantly impacted the pharmaceutical industry.

This comprehensive legislative overhaul was expected to extend coverage to approximately 36 million previously uninsured Americans.

The ACA's individual mandate was repealed by Congress in The Tax Cuts and Jobs Act of 2017, or the Tax Act, tax reform bill that was signed into law in December 2017 and became effective January 1, 2019.

The ACA also requires the pharmaceutical industry to share in the costs of reform by increasing Medicaid rebates and expanding Medicaid rebates to cover Medicaid managed care programs, among other things.

The ACA also includes funding of pharmaceutical costs for Medicare patients in excess of the prescription drug coverage limit and below the catastrophic coverage threshold.

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

For example, the ACA's individual mandate was repealed by Congress in The Tax Cuts and Jobs Act of 2017 (the “Tax Act”), which was signed into law in December 2017 and became effective January 1, 2019.

On December 14, 2018, a U.S.

District Court Judge in the Northern District of Texas ruled that the individual mandate is a critical and inseverable feature of the ACA, and because it was repealed as part of the Tax Act, the remaining provisions of the ACA are invalid as well.

In December 2019, the U.S.

Court of Appeals for the Fifth Circuit upheld the lower court decision, which was then appealed to the U.S.

Supreme Court.

On June 17, 2021, the U.S.

Ultimately, on June 17, 2021, the U.S.

Supreme Court held that state and individual plaintiffs did not have standing to challenge the individual mandate provision of the ACA;

in so holding, the Supreme Court did not consider larger constitutional questions about the validity of this provision or the validity of the ACA in its entirety.

It is unclear how this decision, subsequent appeals, if any, and other efforts to modify, repeal and replace the ACA will impact the ACA.

The ACA requires the pharmaceutical industry to share in the costs of reform by increasing Medicaid rebates and expanding Medicaid rebates to cover Medicaid managed care programs, among other things.

The ACA also includes funding of pharmaceutical costs for Medicare patients in excess of the prescription drug coverage limit and below the catastrophic coverage threshold.

The Bipartisan Budget Act of 2018, or the BBA, among other things, amends the ACA, effective January 1, 2019, to close this gap, also known as the “donut hole”.

Additionally, an excise tax was levied against certain branded

pharmaceutical products.

The Administration is expected to evaluate drug pricing and the Medicare parts B and D programs in terms of legislative or policy changes in the current session of Congress.

In addition, there have been a number of health reform initiatives by the Biden administration that have impacted the ACA.

For example, on August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (“IRA”) into law, which among other things, extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025.

The IRA also eliminates the "donut hole" under the Medicare Part D program beginning in 2025 by significantly lowering the beneficiary maximum out-of-pocket cost and creating a new manufacturer discount program.

It is possible that there will be additional health reform measures.

It is unclear how any such challenges, if any, and other efforts to modify, repeal and replace the ACA will impact the ACA.

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

Congressional inquiries and federal and state legislation designed to, among other things, increase drug pricing transparency, expedite generic competition, review relationships between pricing and manufacturer patient assistance programs, and reform government program drug reimbursement methodologies.

At the federal level, in July 2021, the Biden administration released an executive order that included multiple provisions aimed at prescription drugs.

In response to Biden’s executive order, on September 9, 2021, the U.S.

Department of Health and Human Services (“HHS”) released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform.

The plan sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles.

In addition, the IRA, among other things (i) directs HHS to negotiate the price of certain high-expenditure, single-source drugs and biologics covered under Medicare and (ii) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation.

These provisions will take effect progressively starting in fiscal year 2023, although they may be subject to legal challenges.

In addition, the Biden administration released an additional executive order on October 14, 2022, directing HHS to report on how the Center for Medicare and Medicaid Innovation can be further leveraged to test new models for lowering drug costs for Medicare and Medicaid beneficiaries.

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

We anticipate that these and other healthcare reform efforts will continue to result in additional downward pressure on drug pricing.

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

Healthcare Laws

Healthcare providers, physicians and third party payors play a primary role in the recommendation and prescription of drug products that are granted marketing approval.

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The term “remuneration” has been broadly interpreted to include anything of value, including cash, improper discounts, and free or reduced price items and services.

The intent standard under the federal Anti-Kickback Statute was amended by ACA to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

The intent standard under the federal Anti-Kickback Statute was amended by ACA to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or

specific intent to violate it in order to have committed a violation.

Moreover, under the ACA, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil FCA.

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Violations of the federal or state anti-kickback laws can result in exclusion from federal and state health care programs and substantial civil and criminal penalties;

The previous U.S.

presidential administration issued final rules in late 2020 that, among other things, made changes to certain Anti-Kickback safe harbors;

however, implementation of these rules has been and may continue to be affected by a regulatory freeze announced by the current administration in January 2021 and litigation challenging these rules;

• the federal civil and criminal false claims laws and civil monetary penalties laws, including the federal FCA, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, false, fictitious or fraudulent claims for payment from Medicare, Medicaid or other federal healthcare programs, and knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to avoid, decrease or conceal an obligation to pay money to the federal government.

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Proof of intent to deceive is not required to establish liability under the civil False Claims Act;

• the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for, among other things, executing or attempting to execute a scheme to defraud any healthcare benefit program, including any third party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statements or representations, or making false statements relating to healthcare benefits, items, or services.

• the federal Health Insurance Portability and Accountability Act of 1996 ("HIPAA") imposes criminal and civil liability for, among other things, executing or attempting to execute a scheme to defraud any healthcare benefit program, including any third party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statements or representations, or making false statements relating to healthcare benefits, items, or services.

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

• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, which imposes privacy, security, transmission and breach reporting obligations, including mandatory contractual terms, with respect to individually identifiable health information including PHI, upon “covered entities” subject to the law, such as health plans, healthcare clearinghouses and certain healthcare providers, and their respective business associates that perform services on their behalf that involve individually identifiable health information, including PHI.

• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act ("HITECH") and their implementing regulations, which imposes privacy, security, transmission and breach reporting obligations, including mandatory contractual terms, with respect to individually identifiable health information including PHI, upon “covered entities” subject to the law, such as health plans, healthcare clearinghouses and certain healthcare providers, and their respective business associates that perform services on their behalf that involve individually identifiable health information, including PHI.

HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions.

Other federal and state laws, such as the Federal Trade Commission Act, also impose requirements with respect to individuals' personal information;

• the federal Physician Payments Sunshine Act requires certain manufacturers of prescription drugs, devices and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to annually report to CMS information related to payments and other transfers of value to physicians, dentists, optometrists, podiatrists, chiropractors and teaching hospitals, and ownership and investment interests held by physicians and their immediate family members.

• the federal Physician Payments Sunshine Act requires certain manufacturers of prescription drugs, devices and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program to annually report to CMS information related to payments and other transfers of value to physicians, dentists, optometrists, podiatrists, chiropractors, certain other healthcare professionals (such as nurse practitioners and physicians assistants), and teaching hospitals, and ownership and investment interests held by physicians and their immediate family members.

In addition, Section 6004 of the ACA requires annual reporting of information about drug samples that manufacturers and authorized distributors provide to physicians;

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state laws that require drug manufacturers to report information related to drug pricing or payments and other transfers of value to healthcare providers or marketing expenditures and pricing information;

data privacy and security laws and regulations in foreign jurisdictions that may be more stringent than those in the United States (such as the European Union, which adopted the General Data Protection Regulation, or GDPR, which became effective in May 2018);

data privacy and security laws and regulations in foreign jurisdictions that may be more stringent than those in the United States

(such as the European Union, which adopted the General Data Protection Regulation ("GDPR") which became effective in May 2018);

state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts;

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Environmental, Health and Safety Matters

We are subject to extensive environmental, health and safety laws and regulations in a number of jurisdictions, primarily Israel, governing, among other things, (i) the use, storage, registration, handling, emission and disposal of chemicals, waste materials and sewage;

We are subject to extensive environmental, health and safety laws and regulations in a number of jurisdictions governing, among other things, (i) the use, storage, registration, handling, emission and disposal of chemicals, waste materials and sewage;

and (ii) chemical, air, water and ground contamination, air emissions and the cleanup of contaminated sites, including any contamination that results from spills due to our failure to properly dispose of chemicals, waste materials and sewage.

Our operations at our research and development facility in Israel use chemicals and produce waste materials and sewage.

Our activities require permits from various governmental authorities including, local municipal authorities, the Ministry of Environmental Protection and the Ministry of Health.

The Ministry of Environmental Protection and the Ministry of Health, local authorities and the municipal water and sewage company conduct periodic inspections in order to review and ensure our compliance with the various regulations.

These laws, regulations and permits could potentially require the expenditure by us of significant amounts for compliance or remediation.

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In the event of any changes or new laws or regulations, we could be subject to new compliance measures or to penalties for activities which were previously permitted.

For instance, Israeli regulations were promulgated in 2011 relating to the discharge of industrial sewage into the sewer system.

These regulations establish new and potentially significant fees for discharging forbidden or irregular sewage into the sewage system.

The operations of our subcontractors and suppliers are also subject to various Israeli and foreign laws and regulations relating to environmental, health and safety matters, and their failure to comply with such laws and regulations could have a material adverse effect on our business and reputation, result in an interruption or delay in the development or manufacture of our product candidates, or increase the costs for the development or manufacture of our product candidates.

The operations of our subcontractors and suppliers are also subject to various laws and regulations relating to environmental, health and safety matters, and their failure to comply with such laws and regulations could have a material adverse effect on our business and reputation, result in an interruption or delay in the development or manufacture of our product candidates, or increase the costs for the development or manufacture of our product candidates.

Human Capital

As of December 31, 2021, we had a total of 28 employees comprising 14 females and 14 males, all of whom are full-time employees.

As of such date, 14 employees were primarily engaged in research and development activities.

As of December 31, 2022, we had a total of 12 full-time employees.

From time to time, we also retain independent contractors and consultants to support our organization.

We believe our internal R&D capabilities coupled with our third-party R&D consultants are well positioned to execute our pipeline strategy in a cost effective manner.

None of our employees are represented by a labor union, and we consider our employee relations to be good.

We value the importance of retention, growth and development of our employees and we believe we offer competitive compensation (including salary, incentive bonus, and equity) and benefits packages.

We strive to foster a corporate culture built on communication and transparency.

We hold annual company-wide trainings and hold regular company-wide meetings where management communicates notable corporate developments to Company employees.

We are also focused on understanding our diversity and inclusion strengths and opportunities and executing on a strategy to support further progress.

We will continue to promote a work environment that is based on the fundamental principles of human dignity, equality and mutual respect.

Financial and Segment Information

We operate our business as a single segment, as defined by generally accepted accounting principles.

Our financial information is included in the consolidated financial statements and the related notes.

Attracting, retaining and developing employees from a diverse range of backgrounds to support our research, development and clinical activities is an integral part of our human capital strategy and we believe we offer competitive compensation (including salary, incentive bonus, and equity) and benefits packages.

Corporate Information

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As such, we are eligible to take advantage of certain exemptions from various reporting requirements, such as the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, and certain reduced or scaled disclosure requirements available to smaller reporting companies.

Our principal executive offices are located at 520 U.S.

Highway 22, Suite 204, Bridgewater, NJ 08807.

Our principal executive offices are located at 685 Route 202/206 N., Suite 301, Bridgewater, NJ 08807.

Our website is www.vynetherapeutics.com.

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Therefore, investors should monitor our website in addition to following its press releases, filings with the SEC, public conference calls, and webcasts.

The contents of our website are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only.

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

What changed 10-K

Item 1. Business