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Item 1A. Risk Factors

2020-11-10 compared with 2020-08-12 · 540 added, 504 removed, 544 unchanged (66% of the section changed)

The following risk factors and other information included in this Quarterly Report on Form 10-Q and in other documents that we file with the SEC should be carefully considered.

The risks and uncertainties described below are not intended to be exhaustive and are not the only ones we face.

Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations.

The risks and uncertainties summarized above and described below are not intended to be exhaustive and are not the only ones we face.

Additional risks and uncertainties not presently known to us or that we presently deem immaterial may also materially impair our business operations.

Please see page 18 of this Quarterly Report on Form 10-Q for a discussion of some of the forward-looking statements that are qualified by these risk factors.

If any of the following risks actually occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected.

Risks Related to Our Financial Position and Need for Additional Capital

We have incurred significant losses since inception and anticipate that we will continue to incur significant losses for the foreseeable future and may never achieve or maintain profitability.

We have incurred net and comprehensive losses each year since our inception, with the exception of the three months ended September 30, 2018 and June 30, 2020, as a result of the upfront Gossamer payments discussed above.

For the three months ended June 30, 2020, we incurred net and comprehensive income of $9.3 million, compared to net and comprehensive loss of $5.7 million for the three months ended June 30, 2019.

As of June 30, 2020, we had an accumulated deficit of $136.9 million.

To date, we have not commercialized any products or generated any revenues from the sale of products, and we do not expect to generate any product revenues in the foreseeable future.

We do not know whether or when we will generate revenue or become profitable.

We have devoted most of our financial resources to research and development, including our clinical and preclinical development activities.

The amount of our future net losses will depend, in part, on the rate of our future expenditures, and our financial position will depend, in part, on our ability to obtain funding through equity or debt financings, strategic collaborations or grants.

In June 2019 we initiated a Phase 1b clinical trial for our lead product candidate, razuprotafib (formerly AKB-9778), for a topical drop formulation to treat open angle glaucoma and ocular hypertension.

Our other product candidates, including ARP-1536, are in preclinical development.

As a result, we expect that it will be several years, if ever, before we have a product candidate ready for commercialization.

Even if we obtain regulatory approval to market razuprotafib or any of our other product candidates, our future revenues will depend upon the size of any markets in which razuprotafib or any of our other product candidates has received approval, our ability to achieve sufficient market acceptance, reimbursement from third-party payors and other factors.

We expect to continue to incur significant expenses and operating losses for the foreseeable future.

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

advance a topical drop formulation of razuprotafib for the treatment of open angle glaucoma and ocular hypertension, including as we plan to advance into a Phase 2 clinical trial of this product candidate;

seek regulatory approvals for our product candidates that successfully complete clinical trials;

have our product candidates manufactured for clinical trials and for commercial sale;

establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval;

initiate additional preclinical, clinical or other studies for razuprotafib, ARP-1536 and other product candidates that we may develop or acquire, including additional indications for one or more of these product candidates, such as razuprotafib for the treatment of ARDS in adult patients with critical COVID-19;

seek to discover and develop additional product candidates;

acquire or in-license other commercial products, product candidates and technologies;

make royalty, milestone or other payments under any future in-license agreements;

maintain, protect and expand our intellectual property portfolio;

attract and retain skilled personnel;

create additional infrastructure to support our operations as a public company.

Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predic t the timing or amount of increased expenses or when, if at all, we will be able to achieve profitability.

If we are required by the United States Food and Drug Administration (“FDA”) the European Medicines Agency (“EMA”) or other regulatory authorities to perform studies in addition to those currently expected, or if there are any delays in completing our clinical trials or the development of any of our product candidates, our expenses could increase.

The net and comprehensive income (loss) we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance.

In any particular quarter or quarters, our operating results could be below the expectations of securities analysts or investors, which could cause our stock price to decline.

To become and remain profitable, we must succeed in developing and commercializing our product candidates, which must generate significant revenue.

This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our product candidates, discovering additional product candidates, obtaining regulatory approval for these product candidates and manufacturing, marketing and selling any products for which we may obtain regulatory approval.

We are only in the preliminary stages of most of these activities.

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

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

Our failure to become and remain profitable could depress the value of our Company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or even continue our operations.

A decline in the value of our Company could cause you to lose all or part of your investment.

We will require substantial additional financing.

A failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts.

As of June 30, 2020, our cash and cash equivalents were $44.9 million.

We believe that we will continue to expend substantial resources for the foreseeable future developing razuprotafib for the indications that we are pursuing, such as OAG and ocular hypertension.

Additionally, we expect to expend substantial resources to further develop ARP-1536.

We may also expend substantial resources to develop any other product candidates that we may develop or acquire.

These expenditures will include costs associated with research and development, potentially obtaining regulatory approvals and having our products manufactured, as well as marketing and selling products approved for sale, if any.

In addition, other unanticipated costs may arise.

Because the outcome of our current and anticipated clinical trials is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates.

Our future capital requirements depend on many factors, including:

the rate of progress, results and cost of commencing our planned Phase 2 program of razuprotafib for open angle glaucoma and ocular hypertension and our operating costs incurred as we conduct these trials, including any unforeseen costs we may incur as a result of clinical trial delays due to the COVID-19 pandemic or other causes;

the scope, size, rate of progress, results and costs of initiating and completing additional development of razuprotafib;

assuming favorable clinical results, the cost, timing and outcome of our efforts to obtain marketing approval for razuprotafib in the United States, Europe and in other jurisdictions, including to fund the preparation and filing of regulatory submissions for razuprotafib with the FDA, the EMA and other regulatory authorities;

the scope, progress, results and costs of preclinical development, laboratory testing and clinical trials that we may undertake for ARP-1536 and any other product candidates that we may develop or acquire;

the timing of, and the costs involved in, obtaining regulatory approvals for ARP-1536 if clinical trials of this product candidate are successful;

the cost and timing of future commercialization activities for our products, if any of our product candidates are approved for marketing, including product manufacturing, marketing, sales and distribution costs;

the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval;

the cost of having our product candidates manufactured for clinical trials in preparation for regulatory approval and in preparation for commercialization;

our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such agreements;

the costs involved in preparing, filing, prosecuting patent applications, maintaining, defending and enforcing our intellectual property rights, including litigation costs and the outcome of such litigation.

Based on our current operating plan, and absent any future financings or strategic partnerships, we believe that our existing cash and cash equivalents will be sufficient to fund our projected operating expenses and capital expenditur e requirements through at least the fourth quarter of 2021.

However, our operating plan may change as a result of many factors currently unknown to us, and we may need additional funds sooner than planned.

In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.

Additional funds may not be available when we need them on terms that are acceptable to us, or at all.

Market vo latility resulting from the COVID-19 pandemic or other factors could also adversely impact our ability to access capital as and when needed.

If adequate funds are not available to us on a timely basis, we may be required to delay, limit, reduce or terminat e preclinical studies, clinical trials or other development activities for razuprotafib , ARP-1536 or any other product candidates that we develop or acquire, or delay, limit, reduce or terminate our establishment of sales and marketing capabilities or othe r activities that may be necessary to commercialize our product candidates.

Our corporate restructuring and the associated headcount reduction may not result in anticipated savings, could result in total costs and expenses that are greater than expected and could disrupt our business.

In April 2019, we adopted a realignment plan to reduce operating costs and better align our workforce with the needs of our ongoing business .

The realignment plan reduced our workforce by 11 employees, representing approximately 41% of our workforce.

We may not realize, in full or in part, the anticipated benefits, savings and improvements in our cost structure from our restructuring efforts due to unforeseen difficulties, delays or unexpected costs.

If we are unable to realize the expected operational efficiencies and cost savings from the restructuring, our operating results and financial condition would be adversely affected.

Furthermore, our restructuring plan may be disruptive to our operations.

For example, our headcount reductions could yield unanticipated consequences, such as increased difficulties in implementing our business strategy, including retention of our remaining employees .

We cannot assure you that our exploration of strategic alternatives will result in a transaction or that any such transaction would be successful, and the process of exploring strategic alternatives or its conclusion could adversely impact our business and our stock price.

In October 2019, we announced the engagement of Evercore, Ladenburg Thalmann & Co.

and Duane Nash, M.D., J.D., M.B.A.

to assist us in identifying and evaluating a range of potential strategic alternatives, including an acquisition, company sale, merger, business combination, asset sale, in-license, out-license or other strategic transaction.

This strategic alternative process is ongoing.

There can be no assurances that the strategic alternatives process will result in the announcement or consummation of any strategic transaction, or that any resulting plans or transactions will yield additional value for shareholders.

Any potential transaction would be dependent on a number of factors that may be beyond our control, including, among other things, market conditions, industry trends, the interest of third parties in a potential transaction with us and the availability of financing to potential buyers on reasonable terms.

The process of exploring strategic alternatives could adversely impact our business, financial condition and results of operations.

We could incur substantial expenses associated with identifying and evaluating potential strategic alternatives, including those related to equity compensation, severance pay and legal, accounting and financial advisory fees.

In addition, the process may be time consuming and disruptive to our business operations, could divert the attention of management and the Board of Directors from our business, could negatively impact our ability to attract, retain and motivate key employees, and could expose us to potential litigation in connection with this process or any resulting transaction.

Further, speculation regarding any developments related to the review of strategic alternatives and perceived uncertainties related to the future of the Company could cause our stock price to fluctuate significantly.

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

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings and license, development and commercialization agreements with collaborators.

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

Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take certain actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise additional funds through strategic collaborations with third parties, we may have to relinquish valuable rights to our product candidates, future revenue streams, research programs or product candidates or grant licenses on terms that are not favorable to us.

For example, in June 2018, we entered into a license agreement with Gossamer for the development and commercialization of AKB-4924.

If we are unable to raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts for razuprotafib, ARP-1536 or any other product candidates that we develop or acquire, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

We commenced active operations in 2011, and our operations to date have been limited to organizing and staffing our Company, business planning, raising capital, identifying potential product candidates, undertaking preclinical studies and conducting clinical trials.

We currently have two product candidates that we are developing internally, one of which is in preclinical development.

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

Only a small fraction of biopharmaceutical development programs ultimately results in commercial products or even product candidates and a number of events could delay our development efforts and negatively impact our ability to obtain regulatory approval for, and to manufacture, market and sell, a product.

We have not yet demonstrated our ability to successfully complete later stage clinical trials, obtain regulatory approvals, manufacture a commercial scale product, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization.

Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history.

In addition, as a young business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors.

We will need to expand our capabilities to support commercial activities.

We may not be successful in adding such capabilities.

Risks Related to Our Business and the Clinical Development, Regulatory Review and Approval of Product Candidates

Risks Related to the COVID-19 Pandemic

The current pandemic of COVID-19 and the future outbreak of other highly infectious or contagious diseases could seriously harm our research, development and potential future commercialization efforts, increase our costs and expenses and have a material adverse effect on our business, financial condition and results of operations.

Broad-based business or economic disruptions could adversely affect our ongoing or planned research and development activities.

For example, in December 2019, an outbreak of a novel strain of coronavirus originated in Wuhan, China, and has since spread to other regions and countries worldwide.

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and the U.S.

government-imposed travel restrictions on travel between the United States, Europe and certain other countries.

To date, the COVID-19 pandemic has caused significant disruptions to the U.S.

and global economy and has contributed to significant volatility and negative pressure in financial markets.

The global impact of the outbreak is continually evolving and, as additional cases of the virus are identified, many countries, including the U.S., have reacted by instituting quarantines, restrictions on travel and other public health safety measures.

Such orders, restrictions and recommendations, and the perception that additional orders, restrictions or recommendations could occur, have resulted in widespread closures of businesses not deemed “essential,” work stoppages, slowdowns and delays, work-from-home policies, travel restrictions and cancellation of events, as well as record declines in stock prices, among other effects.

Although some states are starting to relax quarantines and similar restrictions, the regulations vary on a state by state basis and the impact of loosening of those restrictions is not yet known.

The extent to which COVID-19 may impact our preclinical studies or clinical trial operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, the severity of COVID-19, or the effectiveness of actions to contain and treat COVID-19.

For example, while we initiated our ongoing Phase 2 clinical trial of razuprotafib for open angle glaucoma in June 2020, the cost, timeline, completion and conduct of this trial will be subject to potential delays arising from the ongoing COVID-19 pandemic.

The continued spread of COVID-19 globally could adversely impact our preclinical studies or clinical trial operations in the United States, including our ability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 if an outbreak occurs in their geography.

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

Any negative impact COVID-19 has to patient enrollment or treatment or the execution of our current product candidates and any future product candidates could cause costly delays to clinical trial activities, which could adversely affect our ability to obtain regulatory approval for and to commercialize our current product candidate and any future product candidates, increase our operating expenses, and have a material adverse effect on our financial results.

Further, the COVID-19 outbreak may delay enrollment in our clinical trials due to diversion or prioritization of trial site resources away from the conduct of clinical trials and toward the COVID-19 pandemic.

Key clinical trial activities, such as site monitoring, may be interrupted due to restrictions in travel, and some patients may be unwilling to enroll in our trials or be unable to comply with clinical tri al protocols if quarantines or travel restrictions impede patient movement or interrupt healthcare services, which would delay our ability to conduct clinical trials or release clinical trial results.

The spread of COVID-19, or another infectious disease, could also negatively affect the operations at our third-party manufacturers, which could result in delays or disruptions in the supply of our current product candidates and any future product candidates.

In addition, we may continue to take temporary prec autionary measures intended to help minimize the risk of the virus to our employees, including temporarily requiring all employees to work remotely, suspending all non-essential travel worldwide for our employees, and discouraging employee attendance at in dustry events and in-person work-related meetings, which could negatively affect our business.

Additionally, timely enrollment in our clinical trials is dependent upon clinical trial sites which may be adversely affected by global health matters, such as pandemics.

For example, we are currently conducting our ongoing Phase 2 clinical trial for razuprotafib for open angle glaucoma, and our trial sites are located in geographies that have been affected by COVID-19.

Some factors from the COVID-19 outbreak that may adversely affect enrollment in the clinical trials of our product candidates include:

the potential diversion of healthcare resources away from the conduct of clinical trials to focus on pandemic concerns, including the attention of physicians serving as our clinical trial investigators, hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

limitations on travel that could interrupt key trial activities, such as clinical trial site initiations and monitoring, domestic and international travel by employees, contractors or patients to clinical trial sites, and delay or inability to secure visas or entry permission, as applicable;

interruption in global shipping affecting the transport of clinical trial materials, such as patient samples, investigational drug product and conditioning drugs and other supplies used in our clinical trials;

employee disruptions caused by workplace closures, staffing shortages, travel limitations or mass transit disruptions, that could adversely impact our business operations or delay necessary interactions with local regulators, ethics committees and other important agencies and contractors.

We cannot presently predict the scope and severity of any potential business shutdowns or disruptions.

If we or any of the third parties with whom we engage were to experience additional shutdowns or other prolonged business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could have a material adverse impact on our business and our results of operation and financial condition.

Risks Related to Clinical Development

We depend heavily on the success of our lead product candidate, razuprotafib.

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Topical ocular administration of razuprotafib was well-tolerated over seven days, with 21.9% of subjects experiencing hyperemia compared with 9.1% of subjects in the prostaglandin alone arm.

Based on the preclinical proof of concept and the results of the Phase 1b trial showing a reduction in IOP in patients with OHT and OAG, we initiated our Phase 2 clinical trial in June 2020 and expect results in the fourth quarter of 2020, subject to potential delays in subject enrollment and study completion, including due to the COVID-19 pandemic.

Based on the preclinical proof of concept and the results of the Phase 1b trial showing a reduction in IOP in patients with OHT and OAG, we initiated our Phase 2 clinical trial in June 2020 and expect to report topline results from the study December or possibly in early January 2021 to coincide with seasonal healthcare industry conference, subject to potential delays in subject enrollment and study completion, including due to the COVID-19 pandemic.

In addition, in May 2020, we were selected by Quantum Leap Healthcare Collaborative to participate in the I-SPY COVID Trial to evaluate razuprotafib for the treatment of COVID-19 related ARDS in adult patients with critical COVID-19.

However, investigation into the therapeutic potential of razuprotafib in this indication is in its early stages and is exploratory, and there can be no assurance that the development of razuprotafib will yield promising results in this indication or that such development will be successful or otherwise proceed on the anticipated timelines or within the anticipated budget.

However, investigation into the the rapeutic potential of razuprotafib in this indication is in its early stages and is exploratory, and there can be no assurance that the development of razuprotafib will yield promising results in this indication or that such development will be successful or otherwise proceed on the anticipated timelines or within the anticipated budget.

The I-SPY COVID trial is an investigator-sponsored clinical trial, which is being conducted by Quantum Leap.

While we have provided input to I-SPY with respect to the razuprotafib arm of the I-SPY COVID clinical trial, we have not controlled and do not control the design or administration of investigator-sponsored clinical trials, nor the submission or approval of any IND or foreign equivalent required to conduct these trials.

While we have provided input to I-SPY with respect to the razup rotafib arm of the I-SPY COVID clinical trial, we have not controlled and do not control the design or administration of investigator-sponsored clinical trials, nor the submission or approval of any IND or foreign equivalent required to conduct these trial s.

As a result, investigator-sponsored trials could, depending on the actions of such third parties, jeopardize the validity of the clinical data generated, identify significant concerns with respect to our product candidates that could impact our findings or clinical trials, and adversely affect our ability to obtain marketing approval from the FDA or other applicable regulatory authorities.

To the extent the results of this or other investigator-sponsored trials are inconsistent with, or different from, the results of our company-sponsored trials or raise concerns regarding our product candidates, the FDA or a foreign regulatory authority may question the results of the company-sponsored trial, or subject such results to greater scrutiny than it otherwise would.

To the extent the results of this or other investigator-sponsored trials are inconsistent with, or different from, t he results of our company-sponsored trials or raise concerns regarding our product candidates, the FDA or a foreign regulatory authority may question the results of the company-sponsored trial, or subject such results to greater scrutiny than it otherwise would.

In these circumstances, the FDA or such foreign regulatory authorities may require us to obtain and submit additional clinical data, which could delay clinical development or marketing approval of our product candidates.

In addition, while investigator-sponsored trials could be useful to inform our own clinical development efforts, there is no guarantee that we will be able to use the data from these trials to form the basis for regulatory approval of our product candidates.

In addition, while investiga tor-sponsored trials could be useful to inform our own clinical development efforts, there is no guarantee that we will be able to use the data from these trials to form the basis for regulatory approval of our product candidates.

We currently have no products for sale, generate no revenues from sales of any drugs, and may never be able to develop marketable products.

Razuprotafib will require substantial additional clinical development, testing, manufac turing process development, and regulatory approval before we are permitted to commence its commercialization.

Razuprotafib will require substantial additional clinical development, testing, manufacturing process development, and regulatory approval before we are permitted to commence its commercialization.

We are currently evaluating development options for ARP-1536, which is our other product candidate that we are developing internally.

None of our product candidates has advanced into a pivotal trial, and it may be years before such a trial is initiated, if ever.

The clinical trials of our product candidates are, and the manufacturing and marketing of our product candidates will be, subject to exten sive and rigorous review and regulation by numerous government authorities in the United States and in other countries where we intend to test and, if approved, market any product candidates.

The clinical trials of our product candidates are, and the manufacturing and marketing of our product candidates will be, subject to extensive and rigorous review and regulation by numerous government authorities in the United States and in other countries where we intend to test and, if approved, market any product candidates.

Before obtaining regulatory approval for the commercial sale of any product candidate, we must demonstrate through extensive preclinical testing and clinical trials that any drug candidate is safe and effective and any biological product candidate is safe, pure, and potent for use in each target indication.

This proces s can take many years.

This process can take many years.

Of the large number of drugs in development in the United States, only a small percentage successfully complete the FDA regulatory approval process and are commercialized.

Accordingly, even if we are able to obtain the requisite capi tal to continue to fund our development and clinical programs, we may be unable to successfully develop or commercialize razuprotafib .

Accordingly, even if we are able to obtain the requisite capital to continue to fund our development and clinical programs, we may be unable to successfully develop or commercialize razuprotafib.

We are not permitted to market razuprotafib in the United States until we receive approval of an NDA from the FDA, or in any foreign countries until we receive the requisite approval from such countries.

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Because our business is substantially dependent upon razuprotafib, any such setback in our pursuit of regulatory approval would have a material adverse effect on our business and prospects.

Alternatively, even if we obtain regulatory approval, that approval may b e for indications or patient populations that are not as broad as we intend or desire or may require labeling that includes significant use or distribution restrictions or safety warnings.

We may also be required to perform additional, unanticipated clinic al trials to obtain approval or be subject to additional post marketing testing requirements to maintain regulatory approval.

In addition, regulatory authorities may withdraw their approval of a product or the FDA may require a risk evaluation and mitigati on strategy (“REMS”) for a product, which could impose restrictions on its distribution.

Alternatively, even if we obtain regulatory approval, that approval may be for indications or patient populations that are not as broad as we intend or desire or may require labeling that includes significant use or distribution restrictions or safety warnings.

We may also be required to perform additional, unanticipated clinical trials to obtain approval or be subject to additional post marketing testing requirements to maintain regulatory approval.

In addition, regulatory authorities may withdraw their approval of a product or the FDA may require a risk evaluation and mitigation strategy (“REMS”) for a product, which could impose restrictions on its distribution.

Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.

We have not obtained agreement with the FDA, EMA or other regulatory authorities on the design of our development programs.

While we have interacted with the FDA and received feedback from the agency for the design of our ongoing Phase 2 clinical trial of razuprotafib, we have not obtained agreement with the FDA on the design of such trial or any future trials we may conduct for this product candidate.

As a result, we have not yet received additional regulatory input on the development program for razuprotafib beyond our ongoing clinical trial or any other product candidate.

As we progress this candidate through clinical trials, the FDA may determine that we would be required to conduct additional clinical trials.

The FDA could also disagree with our proposed design of our planned development programs and could suggest a larger number of subjects or a longer course of treatment than our current expectations.

If the FDA takes such positions, the costs of our razuprotafib development program could increase materially and the potential market introduction of razuprotafib could be delayed or we could risk not obtaining FDA approval even if our clinical trials meet their primary endpoints.

The FDA also may require that we conduct additional clinical, nonclinical or manufacturing validation studies and submit that data before it will consider an NDA application.

We have not yet sought guidance for the regulatory path for the topical formulation of razuprotafib for open angle glaucoma and ocular hypertension with the FDA, EMA or other regulatory authorities, nor have we interacted with such agencies with respect to the development of razuprotafib for any other indications, including for COVID-19.

We cannot predict what additional requirements may be imposed by these regulatory authorities or how such requirements might delay or increase costs for our planned development programs.

Because our business is almost entirely dependent upon the successful development, regulatory approval, and commercialization of razuprotafib, any such delay or increase in costs would have an adverse effect on our business.

Broad-based business or economic disruptions could adversely affect our ongoing or planned research and development activities.

For example, in December 2019, an outbreak of a novel strain of coronavirus originated in Wuhan, China, and has since spread to other regions and countries worldwide.

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and the U.S.

government imposed travel restrictions on travel between the United States, Europe and certain other countries.

To date, the COVID-19 pandemic has caused significant disruptions to the U.S.

and global economy and has contributed to significant volatility and negative pressure in financial markets.

Almost all U.S.

states and many local jurisdictions, including where we or the third parties with whom we engage operate, have issued “shelter-in-place” orders, quarantines, executive orders and similar government orders, restrictions, and recommendations for their residents to control the spread of COVID-19.

Although some states are starting to relax quarantines and similar restrictions, the regulations vary on a state by state basis and the impact of loosening of those restrictions is not yet known.

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

Further, the COVID-19 outbreak may delay enrollment in our clinical trial s due to diversion or prioritization of trial site resources away from the conduct of clinical trials and toward the COVID-19 pandemic.

Key clinical trial activities, such as site monitoring, may be interrupted due to restrictions in travel, and some patie nts may be unwilling to enroll in our trials or be unable to comply with clinical trial protocols if quarantines or travel restrictions impede patient movement or interrupt healthcare services, which would delay our ability to conduct clinical trials or re lease clinical trial results.

In addition, we may continue to take temporary precautionary measures intended to help minimize the risk of the virus to our employees, including temporarily requiring all employees to work remotely, suspending all non-ess ential travel worldwide for our employees, and discouraging employee attendance at industry events and in-person work-related meetings, which could negatively affect our business.

Additionally, timely enrollment in our clinical trials is dependent upon clinical trial sites which may be adversely affected by global health matters, such as pandemics.

Some factors from the COVID-19 outbreak that may adversely affect enrollment in the clinical trials of our product candidates include:

We cannot presently predict the scope and severity of any potential business shutdowns or disruptions.

We may find it difficult to enroll patients in our clinical trials, which could delay or prevent clinical trials of our product candidates.

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proximity and availability of clinical trial sites for prospective patients;

availability of competing therapies and clinical trials and clinicians’ and patients’ perceptions as to the potential adva ntages of razuprotafib or any other product candidate in relation to available therapies or other products under development;

availability of competing therapies and clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of razuprotafib or any other product candidate in relation to available therapies or other products under development;

efforts to facilitate timely enrollment in clinical trials;

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If we have difficulty enrolling a sufficient number of patients to conduct our clinical trials as planned, we may need to delay, limit or terminate ongoing or planned clinical trials, any of which would have an adverse effect on our business.

With respect to the investigator-sponsored I-SPY trial to evaluate razuprotafib for its potential to treat ARDS associated with COVID-19, the trial may encounter enrollment challenges due to the large number of product candidates in development for the indication, all of whom compete for patients.

Such enrollment challenges may be exacerbated to the extent additional product candidates enter development or the number of COVID-19 patients eligible for evaluation decline.

We may not be able to comply with requirements of foreign jurisdictions in conducting trials outside of the United States.

In addition, we may not be able to obtain regulatory approval in foreign jurisdictions.

We may conduct our clinical trials for our product candidates in trial sites outside of the United States, including Japan and the European Union, and seek regulatory approval for our product candidates in major markets in addition to the United States, including the European Union and Japan.

Our ability to successfully initiate, enroll and complete a clinical trial in any foreign country, should we attempt to do so, is subject to numerous risks unique to conducting business in international markets, including:

difficulty in establishing or managing relationships with qualified CROs and physicians;

different local standards for the conduct of clinical trials;

the potential burden of complying with a variety of foreign laws, medical standards and regulatory requirements, including the regulation of pharmaceutical and biotechnology products and treatments;

the acceptability of data obtained from trials conducted in the United States to the EMA and other regulatory authorities.

If we fail to successfully meet requirements for the conduct of clinical trials outside of the United States, we may be delayed in obtaining, or be unable to obtain, regulatory approval for our product candidates in countries outside of the United States.

Regulatory authorities outside the United States will require compliance with numerous and varying regulatory requirements.

The approval procedures vary among jurisdictions and may involve requirements for additional testing, and the time required to obtain approval may differ from that required to obtain FDA approval.

In addition, in many countries outside the United States, a product must be approved for reimbursement before it can be approved for sale in that country.

In some cases, the price that we intend to charge for our products is also subject to approval.

Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA.

However, the failure to obtain approval in one jurisdiction may negatively impact our ability to obtain approval in another jurisdiction.

The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval.

We may not obtain foreign regulatory approvals on a timely basis, if at all.

We may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize our products in any market.

With respect to the investigator-sponsored I-SPY trial to evaluate razuprotafib for its potential to treat ARDS associated with COVID-19, the trial may encounter enrollme nt challenges due to the large number of product candidates in development for the indication, all of whom compete for patients.

Such enrollment challenges may be exacerbated to the extent additional product candidates enter development or the number of CO VID-19 patients eligible for evaluation decline.

Clinical drug development is a lengthy and expensive process with an uncertain outcome, and positive results from preclinical studies or earlier stage clinical trials are not necessarily predictive of the results of our future clinical trials of razuprotafib.

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Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical trials after achieving positive results in early stage development, and we may face similar setbacks.

If the results of our ongoing or future clinical trials for razuprotafib are i nconclusive with respect to efficacy, if we do not meet our clinical endpoints with statistical significance, or if there are safety concerns or adverse events, we may be prevented from or delayed in obtaining marketing approval for razuprotafib .

If the results of our ongoing or future clinical trials for razuprotafib are inconclusive with respect to efficacy, if we do not meet our clinical endpoints with statistical significance, or if there are safety concerns or adverse events, we may be prevented from or delayed in obtaining marketing approval for razuprotafib.

We may experience delays in the planned clinical development program for razuprotafib, and we do not know whether planned clinical trials will begin on time, need to be redesigned, enroll patients on time or be completed on schedule, if at all.

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Any of these occurrences may harm our business, financial condition and prospects significantly.

Risks Related to Regulatory Review and Approval of Product Candidates

We have not obtained agreement with the FDA, EMA or other regulatory authorities on the design of our development programs.

As a result, we have not yet received additional regulatory input on the development program for razuprotafib beyond our ongoing clinical trial or any other product candidate.

As we progress this candidate through clinical trials, the FDA may determine that we would be required to conduct additional clinical trials.

The FDA could also disagree with our proposed design of our planned development programs and could suggest a larger number of subjects or a longer course of treatment than our current expectations.

The FDA also may require that we conduct additional clinical, nonclinical or manufacturing validation studies and submit that data before it will consider an NDA application.

We cannot predict what additional requirements may be imposed by these regulatory authorities or how such requirements might delay or increase costs for our planned development programs.

Even if we receive regulatory approval for our product candidates, such products will be subject to ongoing regulatory review, which may result in significant additional expense.

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

Risks Related to Our Reliance on Third Parties

We rely on third parties to conduct preclinical studies and clinical trials for our product candidates, and if they do not properly and successfully perform their obligations to us, we may not be able to obtain regulatory approvals for our product candidates.

We rely on third party CROs and other third parties to assist in managing, monitoring and otherwise carrying out our clinical trials.

We expect to continue to rely on third parties, such as CROs, clinical data management organizations, medical institutions and clinical investigators to conduct our clinical trials in the future, including our ongoing Phase 2 clinical trial for razuprotafib.

We compete with many other companies for the resources of these third parties.

The third parties on whom we rely may terminate their engagements with us at any time, and having to enter into alternative arrangements would delay development and commercialization of our product candidates.

Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our responsibilities.

For example, the FDA and foreign regulatory authorities require compliance with regulations and standards, including GCP requirements, for designing, conducting, monitoring, recording, analyzing and reporting the results of clinical trials to ensure that the data and results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected.

Although we rely on third parties to conduct our clinical trials, we are responsible for ensuring that each of these clinical trials is conducted in accordance with its general investigational plan and protocol under legal and regulatory requirements.

Regulatory authorities enforce these GCP requirements through periodic inspections of trial sponsors, principal investigators and trial sites.

If we or any of our investigators or CROs fail to comply with applicable GCP requirements, the clinical data generated in our clinical trials may be deemed unreliable and the FDA, EMA or other regulatory authorities may require us to perform additional clinical trials before approving our marketing applications.

We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP requirements.

In addition, our clinical trials must be conducted with product produced under applicable cGMP regulations.

Failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

If these third parties do not successfully carry out their duties under their agreements, if the quality or accuracy of the data they obtain is compromised due to their failure to adhere to clinical trial protocols or to regulatory requirements, or if they otherwise fail to comply with clinical trial protocols or meet expected deadlines, the clinical trials of our product candidates may not meet regulatory requirements.

If clinical trials do not meet regulatory requirements or if these third parties need to be replaced, preclinical development activities or clinical trials may be extended, delayed, suspended or terminated.

If any of these events occur, we may not be able to obtain regulatory approval of our product candidates on a timely basis or at all.

Further, if these third parties experience disruptions due to the COVID-19 pandemic and government measures taken in response to the COVID-19 pandemic, it may adversely affect our ability to initiate and complete our preclinical studies and clinical trials.

We also expect to rely on other third parties to store and distribute drug supplies for our clinical trials.

Any performance failure on the part of our distributors could delay clinical development or marketing approval of our product candidates or commercialization of our products, producing additional losses and depriving us of potential product revenue.

We intend to rely on third parties to conduct some or all aspects of our product manufacturing, and these third parties may not perform satisfactorily.

We do not have any manufacturing facilities and do not expect to independently conduct our product candidate manufacturing for research and preclinical and clinical testing.

We currently rely, and expect to rely, on third parties to manufacture and supply drug products for our razuprotafib clinical trials, and we expect to continue to rely on third parties for the manufacture of clinical and, if necessary, commercial quantities of our product candidates.

This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.

For example, the extent to which the COVID-19 pandemic impacts our ability to procure sufficient supplies for the development of our product candidates will depend on the severity and duration of the spread of the virus, and the actions undertaken to contain COVID-19 or treat its effects.

Any of these third parties m ay terminate their engagement with us at any time.

We currently have arrangements in place for the manufacturing of drug substance and drug product for our development program s .

Although we believe that there are several potential alternative manufacturers who could manufacture our product candidates, we may incur significant delays and added costs in identifying, qualifying and contracting with any such replacement, as well as producing the drug product.

The FDA or comparable foreign regulatory authorities may find deficiencies with the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies.

Manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP requirements relating to quality control, quality assurance and corresponding maintenance of records and documents.

In addition, we have to enter into technical transfer agre ements and share our know-how with the third-party manufacturers, which can be time-consuming and may result in delays.

These delays could result in a suspension of our clinical trials or, if razuprotafib is approved and marketed, a failure to satisfy pati ent demand.

Reliance on third party manufacturers entails risks to which we would not be subject if we manufactured the product candidates ourselves, including:

the inability to negotiate manufacturing agreements with third parties under commercially reasonable terms;

reduced control as a result of using third party manufacturers for all aspects of manufacturing activities, including regulatory compliance and quality assurance;

termination or nonrenewal of manufacturing agreements with third parties in a manner or at a time that is costly or damaging to us;

the possible misappropriation of our proprietary information, including our trade secrets and know-how;

disruptions to the operations of our manufacturers or suppliers caused by conditions unrelated to our business or operations, including the bankruptcy of the manufacturer or supplier or a catastrophic event affecting our manufacturers or suppliers.

Any of these events could lead to clinical study delays or failure to obtain regulatory approval or affect our ability to successfully commercialize future products.

Some of these events could be the basis for FDA action, including injunction, recall, seizure or total or partial suspension of production.

The facilities used by our contract manufacturers to manufacture our product candidates must be evaluated by the FDA pursuant to inspections that will be conducted after we submit our NDA to the FDA.

We do not control the manufacturing process of, and are completely dependent on, our contract manufacturers for compliance with cGMP requirements for manufacture of both drug substance and finished drug product.

If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA, we will not be able to secure and/or maintain regulatory approval for our product candidates.

In addition, we have no control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel.

If the FDA, EMA or other regulatory authorities find deficiencies with or do not approve these facilities for the manufacture of our product candidates, or if they find deficiencies or withdraw any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.

Moreover, our failure, or the failure of our third party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of product candidates or products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our drug products or product candidates.

In addition, our product candidates and any products that we may develop may compete with other product candidates and products for access to manufacturing facilities.

Certain of these manufacturing facilities may be contractually prohibited from manufacturing our product due to non-compete agreements with our competitors.

There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us.

Our current and anticipated future dependence upon others for the manufacture of our product candidates or products may adversely affect our future profit margins and our ability to commercialize any products that receive marketing approval on a timely and competitive basis.

If we are unable to manufacture our product candidates in sufficient quantities, at sufficient yields, we may experience delays in pro duct development, clinical trials, regulatory approval and commercial distribution.

Completion of our clinical trials and commercialization of our product candidates require access to, or development of, facilities to manufacture our product candidates at sufficient yields and at commercial scale.

We have limited experience manufacturing, or managing third parties in manufacturing, any of our product candidates in the volumes that will be necessary to support large-scale clinical trials or commercial sales.

Efforts to establish these capabilities may not meet initial expectations as to scheduling, scale-up, reproducibility, yield, purity, cost, potency or quality.

Our reliance on contract manufacturers may adversely affect our operations or result in unforeseen delays or other problems beyond our control.

Because of contractual restraints and the limited number of third-party manufacturers with the expertise and facilities to manufacture our bulk drug product on a commercial scale, replacement of a manufacturer may be expensive and time-consuming and may cause interruptions in the production of our drug product.

A third-party manufacturer may also encounter difficulties in production.

These problems may include:

difficulties with production costs, scale-up and yields;

availability of raw materials and supplies;

quality control and assurance;

shortages of qualified personnel;

compliance with strictly enforced federal, state and foreign regulations that vary in each country where a product might be sold;

lack of capital funding.

Any delay or interruption in our supply of product candidates could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We may not be successful in establishing and maintaining strategic collaborations, which could adversely affect our ability to develop and commercialize our product candidates, negatively impacting our operating results.

If approved, we plan to commercialize razuprotafib ourselves in the United States and intend to seek one or more strategic collaborators to commercialize razuprotafib in additional markets.

With respect to ARP-1536, we are evaluating its development options.

We face competition in seeking appropriate collaborators for our product candidates, and the negotiation process is time-consuming and complex.

In order for us to successfully collaborate with a third party on our product candidates, potential collaborators must view these product candidates as economically valuable.

Even if we are successful in our efforts to establish strategic collaborations, the terms that we agree upon may not be favorable to us, and we may not be able to maintain such strategic collaborations if, for example, development or approval of a product is delayed or sales of an approved product are disappointing.

Any delay in entering into strategic collaboration agreements related to our product candidates could delay the development and commercialization of our product candidates and reduce their competitiveness even if they reach the market.

In addition, our strategic collaborators may terminate any agreements they enter into with us, and we may not be able to adequately protect our rights under these agreements.

Furthermore, our strategic collaborators will likely negotiate for certain rights to control decisions regarding the development and commercialization of our product candidates, if approved, and may not conduct those activities in the same manner as we do.

On June 24, 2018, we entered into a license agreement with Gossamer pursuant to which we granted to Gossamer an exclusive, sublicensable license to develop and commercialize AKB-4924 and other structurally related products worldwide.

We received an upfront payment of $20.0 million in connection with this license and are eligible to receive additional payments contingent upon the achievement of specified milestones.

On May 12, 2020, we entered into Amendment No.

1 to the Gossamer License Agreement (“Amendment 1”) and received a payment of $15.0 million in conjunction with the terms of the Amendment 1.

We are also eligible to receive tiered royalties on sales of licensed products and additional payments upon the occurrence of specified events involving the licensed products.

However, there can be no assurance that we will satisfy the conditions to receive any such payments from Gossamer in a timely manner or at all.

While Gossamer is obligated to use its commercially reasonable efforts to develop and commercialize the licensed products, there can be no assurance that such products would be successfully developed and commercialized.

In addition, the license agreement contains an exclusivity provision pursuant to which we are prohibited from developing, manufacturing or commercializing certain HIF stabilizing compounds as described in the agreement.

While the license agreement expires on a licensed product-by-licensed product and country-by-country basis on the later of fifteen years from the date or first commercial sale or when there is no longer a valid patent claim covering such licensed product in such country, either party may terminate the license agreement for an uncured material breach by the other party or upon the bankruptcy or insolvency of the other party.

In addition, Gossamer may terminate the license agreement in the event it determines that there is a potential safety or efficacy issue with the licensed products.

Therefore, there can be no assurance that the license agreement will continue for its full duration or that we will realize the intended benefits of the license agreement.

If we fail to establish and maintain strategic collaborations related to our product candidates for the indications and in the geographies in which we do not intend develop and commercialize ourselves, we will bear all of the risk and costs related to the development and commerc ialization of any such product candidate, and we may need to seek additional financing, hire additional employees and otherwise develop expertise.

This could negatively affect the development of any product candidate for which we do not locate a suitable s trategic partner.

We may not be able to comply with requirements of foreign jurisdictions in conducting trials outside of the United States.

In addition, we may not be able to obtain regulatory approval in foreign jurisdicti ons.