What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-03-11 compared with 2020-03-16 · 828 added, 737 removed, 751 unchanged (68% of the section changed)

Aerpio Pharmaceuticals, Inc.

is a biopharmaceutical company focused on developing compounds that activate Tie2 to treat ocular diseases and diabetic complications.

In March 2019, we announced the top line results of the Phase 2b (“TIME-2b”) clinical trial which we initiated in June 2017 for the treatment of non-proliferative diabetic retinopathy (“NPDR”), a disease characterized by progressive compromise of blood vessels in the back of the eye.

While we believed AKB-9778 had the potential to slow down or possibly reverse retinal vascular changes caused by diabetes, the subcutaneous administration of AKB-9778 twice daily did not meet the study’s primary endpoint of increasing the percentage of patients with an improvement of two or more steps in diabetic retinopathy severity score (“DRSS”), in the study eye, compared to placebo.

However, the TIME-2b study further supported the reduction of intraocular pressure (“IOP”) seen with subcutaneous AKB-9778 in the previous TIME-2 study.

Importantly, IOP is the only identified modifiable risk factor for prevention of vision loss in patients with open angle glaucoma (“OAG”) and ocular hypertension (“OHT”).

Moreover, recently published mouse and human genetic data implicate the Angpt/Tie2 pathway in maintenance of Schlemm’s canal, a critical component of the conventional outflow tract.

The conventional outflow tract is the main conduit for fluid drainage from the front of the eye and the principal regulator of IOP.

Based on these findings, we developed a topical ocular formulation of AKB-9778 and observed in preclinical studies activation of Tie2 in Schlemm’s canal, IOP reduction via enhanced outflow facility and favorable tolerability.

In June 2019, we initiated a double-masked, multiple-ascending dose Phase 1b trial and enrolled four cohorts of 12 subjects each.

Subjects received increasing daily doses of a topical ocular formulation of AKB-9778 or placebo for seven days.

Aerpio Pharmaceuticals, Inc.(“Aerpio” or the “Company”) is a biopharmaceutical company focused on developing compounds that activate Tie2 in indications in which the Company believes that activation of Tie2 may have therapeutic potential.

Our product candidates include razuprotafib (formerly known as AKB-9778), a small molecule VE-PTP inhibitor.

In March 2019, we announced topline results from our Phase 2b (“TIME-2b”) clinical trial of AKB-9778 for the treatment of non-proliferative diabetic retinopathy.

Although the results did not meet the study’s primary endpoint, we believe that the TIME-2b study further supported the reduction of intraocular pressure (“IOP”) seen with subcutaneous razuprotafib in the previous TIME-2 study.

Based on these findings, we developed a topical ocular formulation of razuprotafib, and observed in preclinical studies activation of Tie2 in Schlemm’s canal, IOP reduction via enhanced outflow facility and favorable tolerability.

In June 2019, we initiated a double-masked, multiple-ascending dose Phase 1b clinical trial for open angle glaucoma (“OAG”).

We enrolled four cohorts of 12 subjects each and subjects received increasing daily doses of a topical ocular formulation of razuprotafib or placebo for seven days.

The primary endpoint of the trial was ocular safety and tolerability, with IOP lowering as the key pharmacodynamic endpoint.

In October 2019, we announced interim results from our Phase 1b clinical trial.

The unmasked interim analysis, limited to the first three cohorts, showed the topical ocular administration of AKB-9778 was well tolerated.

Compared to placebo, there was a dose dependent increase in minimal to mild conjunctival hyperemia with AKB-9778, which was transient and generally considered non-adverse, and a time and dose dependent reduction in IOP that, in the highest once daily (“QD”) dose cohort peaked at 4 hours post-dose and was sustained through eight hours on day 7, returning to baseline levels at 24 hours post-dose.

Based on these data, a cohort of 43 patients with OHT/OAG (hypertensive eyes) was added to the ongoing study to assess safety and pilot efficacy in the target patient population.

In January 2020, we announced the results of the ongoing Phase 1b study which are presented below under “Business – AKB-9778 in Open Angle Glaucoma – Clinical Results in OAG”.

Based on the unmasked interim analysis of Phase 1b, limited to the first three cohorts, which showed the topical ocular administration of razuprotafib was well tolerated, and a time and dose dependent reduction in IOP that, in the highest once daily (“QD”) dose cohort peaked at 4 hours post-dose and was sustained through eight hours on day 7, returning to baseline levels at 24 hours post-dose, a cohort of 43 patients with OHT/OAG (hypertensive eyes) was added to the ongoing study to assess safety and pilot efficacy in the target patient population.

In January 2020, we announced the results of the fifth cohort of subjects noting subjects in cohort five randomized to the active arm exhibited statistically significant decreases in IOP at all post razuprotafib administration time points on both days 1 and 7 compared with day -1 baseline values when they were being treated with prostaglandin alone.

When the change is placebo-corrected, razuprotafib plus prostaglandin versus prostaglandin alone produced a statistically significant decrease in IOP on Day 7 at 0, 4 and 8 hours post dose as compared to placebo.

We believed these results suggested a persistent IOP-lowering activity from adding razuprotafib to standard-of-care prostaglandin therapy.

Topical ocular administration of razuprotafib was well tolerated over seven days in cohort five.

There were no reports of conjunctival hemorrhage or pain on instillation during the seven days of dosing and no systemic/non-ocular AEs were observed.

In June 2020, we initiated a Phase 2 clinical trial designed to evaluate the safety and efficacy of a topical formulation of razuprotafib in approximately 195 patients followed over a 28-day period.

Patients enrolled in the trial were administered a baseline of latanoprost ophthalmic solution 0.005%, and then randomized in a 1:1:1 fashion to receive adjunctive therapy consisting of placebo, 40 mg/ml razuprotafib once-daily, or 40 mg/ml razuprotafib twice-daily.

The primary endpoint of the study was mean diurnal IOP at 28 days in the razuprotafib treated groups compared to the latanoprost monotherapy group.

In December 2020, we reported that r azuprotafib met the primary efficacy endpoint at Day 28 with the twice-daily (“BID”) dose group in Aerpio’s double-blind, placebo-controlled Phase 2 trial in patients with elevated IOP associated with OAG or OHT.

The change from baseline in diurnal mean IOP at Day 28 of study eyes treated with razuprotafib BID plus latanoprost showed a statistically significant improvement, or drop in IOP, (two-sided p-value 0.0130 and LS mean difference of -0.92 mm Hg) compared to those treated with latanoprost monotherapy.

The razuprotafib QD dose group did not show a statistically significant improvement at Day 28.

Further analysis of the results demonstrated that razuprotafib had a larger IOP reduction after longer duration dosing (28 days versus 14 days) consistent with its potential mechanism of repairing Schlemm’s canal.

Razuprotafib also produced larger IOP reductions in patients with higher starting IOP, or a 1.6 mm Hg IOP reduction in patients with post wash-out IOP’s of >26 mm Hg and the topical drops were well tolerated in this trial.

While the trial met the primary efficacy endpoint at Day 28 with the BID group, the IOP decrease was not at a level deemed sufficient to move to Phase 3 development.

F ollowing the announcement regarding the topline results from the Phase 2 clinical trial of razuprotafib in patients with elevated IOP associated with OAG or OHT, the Company initiated a process to explore a range of strategic alternatives focused on maximizing stockholder value from our clinical and preclinical assets and cash resources.

As part of this process, we are exploring strategic options for partnering our programs, as well as the potential for an acquisition, company sale, merger, business combination, asset sale, in-license, out-license or other strategic transaction.

Ladenburg Thalmann & Co.

and Duane Nash, M.D., J.D., M.B.A, continue to be retained with respect to the strategic review process.

There can be no assurance that this exploration of strategic alternatives will result in the Company entering or completing any transaction.

Additionally, in January 2021, the Company initiated a realignment plan to reduce operating costs and better align its workforce with the needs of its ongoing business.

The realignment plan reduces its current workforce by 7 employees, representing approximately 58% of our workforce.

As a result of this realignment plan, we estimate we will incur one-time employee related severance expenses of approximately $1.2 million in the first quarter of 2021.

We anticipate the majority of the one-time employee severance liability to be paid during 2021.

Each affected employee’s eligibility for such severance benefits is contingent upon such employee’s execution of a separation agreement, which includes a general release of claims against us.

The charges that we expect to incur in connection with the realignment plan are subject to a number of assumptions, and actual results may differ from our original estimate.

We may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the realignment plan.

Other assets in our pipeline include the following:

Acute Respiratory Distress Syndrome

Based on results in preclinical studies and observations in patients in TIME-2 and TIME-2b trials, we believe that a vascular endothelial receptor, Tie2, may play a pivotal role in the defense against microvascular breach in ARDS.

We hypothesize that razuprotafib may have therapeutic potential for the treatment of COVID-19 associated ARDS and initiated two Phase 2 trials during 2020.

Quantum Leap Healthcare Collaboration I-SPY COVID Trial

In May 2020, we were selected by Quantum Leap Healthcare Collaborative to participate in the I-SPY COVID Trial (Investigation of Serial studies to Predict Your COVID Therapeutic Response with biomarker Integration and Adaptive Learning ) to evaluate subcutaneous razuprotafib for the treatment of COVID-19 related ARDS in adult patients with critical COVID-19 (ClinicalTrials.gov Identifier:

NCT04488081).

The trial was initiated during the third quarter of 2020 but in January 2021, the Data Monitoring Committee recommended discontinuation of razuprotafib after 21 patients due to the complexity of monitoring patients in the setting of a surge in ICU patients.

There were no apparent safety signals associated with razuprotafib in these 21 patients and we believe the scientific basis is sound for continuing to evaluate the drug in patients presenting with ARDS across a broader array of infections.

MTEC RESCUE COVID Trial

In August 2020, we announced the receipt of funding to evaluate subcutaneous razuprotafib in a new randomized, investigational trial for the prevention and treatment of ARDS in adult patients with moderate to severe COVID-19 (“RESCUE” trial;

ClinicalTrials.gov Identifier:

NCT04511650).

The RESCUE trial will evaluate subcutaneous razuprotafib for the prevention and treatment of ARDS in adult patients with moderate to severe COVID-19 as part of the MTEC-20-09-COVID-19 Treatment Military Infectious Disease Research Program (“MIDRP”).

The Medical Technology Enterprise Consortium (“MTEC”), a non-profit organization primarily funded by the U.S.

Army Medical Research and Development Command, will provide up to $5.1 million of reimbursement related to qualified internal and external spending, as it relates to the clinical trial.

The RESCUE clinical trial was initiated during the third quarter of 2020 but we decided to stop recruiting in February 2021 after the first 31 patients were enrolled based on challenges recruiting and monitoring patients in the current pandemic environment.

There were no apparent safety signals associated with dosing COVID-19 patients in the RESCUE trial and we plan to further analyze the data to assess trends in efficacy and biomarkers.

We expect to report top-line data in the second quarter of 2021.

Diabetic Kidney Disease

In two consecutive trials, TIME-2 and TIME-2b, subcutaneous AKB-9778 showed reduction in Urine Albumin-Creatinine Ratio (“UACR”), a measure of progression of diabetic kidney disease.

2 unchanged sentences

We believe that systemic treatment with AKB-9778 could have the potential to change the treatment paradigm for diabetics in the future and potentially address a major societal problem by lowering the cost of care associated generally with diabetes.

ARP-1536, our humanized monoclonal antibody directed at the same target as subcutaneous AKB-9778, is in preclinical development.

ARP-1536 and Bispecific Antibody

ARP-1536, our humanized monoclonal antibody directed at the same target as subcutaneous razuprotafib, is in preclinical development.

We are evaluating development options for ARP-1536, including subcutaneous injection for the treatment of diabetic vascular complications, e.g., diabetic nephropathy and intravitreal injection as an adjunctive therapy for diabetic macular edema.

We are also developing a bispecific antibody that binds both VEGF and VE-PTP which is designed to inhibit VEGF activation and activate Tie2.

We believe this bispecific antibody has the potential to be an improved treatment for wet aged-related macular degeneration (“AMD”) and diabetic macular edema via intravitreal injection.

We are also developing a bispecific antibody that binds both v ascular endothelial growth factor (“VEGF”) and v ascular endothelial protein tyrosine phosphatase (“VE-PTP”) which is designed to inhibit VEGF activation and activate Tie2.

We believe this bispecific antibody has the potential to be an improved treatment for wet AMD and diabetic macular edema via intravitreal injection.

Gossamer License Agreement

In June 2018, we licensed AKB-4924, a selective stabilizer of hypoxia-inducible factor-1 alpha (“HIF-1 alpha”) to Gossamer Bio, Inc.

1 unchanged sentence

HIF-1 alpha is involved in mucosal wound healing and the reduction of inflammation in the gastrointestinal tract.

Gossamer has completed the Phase 1 multiple ascending dose (“MAD”) clinical study and is currently running a Phase 1b clinical study in ulcerative colitis patients.

Gossamer is expected to have results of the Phase 1b study in ulcerative colitis patients in the first half of 2020.

After completing a 28-day Phase 1b study in ulcerative colitis patients during 2020, Gossamer initiated a 12-week Phase 2 study of GB004 in patients with mild-to-moderate ulcerative colitis during the second half of 2020 and expects to report top-line results from this study in the first half of 2022.

Gossamer is responsible for all remaining development and commercial activities for GB004.

Our objective is to develop and advance first-in-class compounds that activate Tie2 to treat ocular diseases and diabetic complications.

Our objective is to develop and advance compounds that activate Tie2 to treat ocular diseases and diabetic complications.

We are taking the following critical steps to achieve this goal:

Advance the development of AKB-9778 for open angle glaucoma

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 plan to further advance the glaucoma program into a Phase 2 clinical trial with results expected in the first quarter of 2021.

The Phase 1b trial results were announced in January 2020.

Investigate the potential of AKB-9778 in other indications

The downregulation of Tie2 activity occurs in the vasculature of diabetics systemically, particularly in the kidney.

In a post-hoc analysis of the earlier TIME-2 clinical trial, there was a 21% reduction (geometric mean) in UACR from baseline in the AKB-9778 treatment arms, but an overall increase in UACR in the placebo arm.

The prospective UACR analyses from the recently completed TIME-2b trial largely replicated the results from the previous trial and reinforced the potential beneficial effects of Tie2 activation in diabetic kidney disease.

Based on the confirmation of decreased of UACR, a potential indicator of improved kidney function, in the completed TIME-2b trial, we are exploring strategic options for further development of AKB-9778 in diabetic nephropathy.

Advance the development of ARP-1536 and the Bispecific antibody

We are evaluating development options for ARP-1536, including subcutaneous injection for the treatment of diabetic vascular complications including nephropathy and intravitreal injection for the adjunctive treatment of diabetic macular edema.

We are also exploring development options for the bispecific antibody.

Explore strategic collaborations with leading organizations for the development and commercialization of promising product candidates in our pipeline

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

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

to explore a range of strategic alternatives focused on maximizing stockholder value from our clinical assets and cash resources.

Such alternatives may include the potential for an acquisition, company sale, merger, business combination, asset sale, in-license, out-license or other strategic transaction.

There can be no assurance that the exploration of strategic alternatives will result in any transaction or other alternative.

Focus on cash management to preserve cash for ongoing clinical trials

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.

On October 15, 2019, our Chief Executive Officer and our Chief Financial and Business Officer departed from their positions.

Our Chief Executive Officer also resigned as a director.

As a result of these actions, we recorded severance expense during the year ended December 31, 2019 for employee related costs, including severance benefits and payment of healthcare insurance premiums .

Additionally, we recorded certain one-time stock-based compensation adjustments for the forfeitures of outstanding equity awards .

AKB-9778 in Open Angle Glaucoma

The Company initiated a process to explore a range of strategic alternatives focused on maximizing stockholder value from our clinical assets and cash resources.

Ladenburg Thalmann & Co.

and Duane Nash, M.D., J.D., M.B.A, continued to be retained with respect to the strategic review process.

There can be no assurance that this exploration of strategic alternatives will result in the Company entering or completing any transaction.

Investigate the sale, licensing or partnering of razuprotafib

While we elected not to advance razuprotafib into Phase 3 development ourselves, we believe the candidate may nevertheless have therapeutic potential in OAG, and we intend to explore strategic opportunities with third parties.

In addition, based on results in preclinical studies and observations in patients in TIME-2 and TIME-2b trials, we believe that a vascular endothelial receptor, Tie2, may play a pivotal role in the defense against microvascular breach in ARDS or potentially across a broader array of infections beyond COVID-19.

Additionally, t he downregulation of Tie2 activity occurs in the vasculature of diabetics systemically, particularly in the kidney.

In a post-hoc analysis of the earlier TIME-2 clinical trial, there was a 21% reduction (geometric mean) in UACR from baseline in the razuprotafib treatment arms, but an overall increase in UACR in the placebo arm.

Explore strategic options for further development of ARP-1536 and the Bispecific antibody

We are exploring strategic options for further development of ARP-1536, including subcutaneous injection for the treatment of diabetic vascular complications including nephropathy and intravitreal injection for the adjunctive treatment of diabetic macular edema.

We are also exploring development options for the bispecific antibody as a potential treatment for wet AMD and DME via intravitreal injection.

Focus on cash management to preserve cash

In January 2021, we initiated a realignment plan to reduce operating costs and better align its workforce with the needs of our ongoing business.

The realignment plan, reduces its current workforce by 7 employees, representing approximately 58% of our workforce.

As a result of this realignment plan, we estimate we will incur one-time employee related severance expenses of approximately $1.2 million in the first quarter of 2021.

We anticipate the majority of the one-time employee severance liability to be paid during 2021.

Razuprotafib in Open Angle Glaucoma

Unmet Medical Need:

7 unchanged sentences

We believe that developing agents that target conventional outflow pathology directly will likely have improved therapeutic potential alone or in combination with approved glaucoma agents and may prevent progression of OAG that often occurs despite current therapy.

Emerging R ole of the Tie2 Pathway in the M aintenance of C onventional O utflow:

Emerging Role of the Tie2 Pathway in the Maintenance of Conventional Outflow:

Recently, two independent groups have shown that Tie2 is expressed and activated in Schlemm’s canal endothelial cells during development and in the mature vessel.

5 unchanged sentences

Role of VE-PTP in Signaling Pathways and Relevance to Glaucoma :

Aerpio has developed first-in-class, potent and selective small molecule inhibitors of the catalytic domain of vascular endothelial protein tyrosine phosphatase (VE-PTP).

In vascular endothelial cells, AKB-9778, Aerpio’s lead VE-PTP inhibitor, activates Tie2 and triggers signaling pathways downstream of Tie2 that have been implicated in modulation of conventional outflow facility.

Aerpio has developed potent and selective small molecule inhibitors of the catalytic domain of vascular endothelial protein tyrosine phosphatase (VE-PTP).

In vascular endothelial cells, razuprotafib, Aerpio’s lead VE-PTP inhibitor, activates Tie2 and triggers signaling pathways downstream of Tie2 that have been implicated in modulation of conventional outflow facility.

These include endothelial nitric oxide synthase (“eNOS”) activation and Rho pathway inhibition via Rac1.

In preclinical studies in mice, topical ocular razuprotafib activated Tie2 in Schlemm’s canal, increased Schelmm’s canal area and reduced IOP via enhanced outflow.

Taken together these results indicate the razuprotafib reduces IOP via a novel and potentially disease modifying Tie2 mediated effect on Schlemm’s canal and conventional outflow.

VE-PTP inhibition as a novel conventional outflow targeted approach for glaucoma treatment

Activation of Tie2, with AKB-9778, affects pathways commonly associated with reduction of intraocular pressure.

Activation of Tie2, with razuprotafib, affects pathways commonly associated with reduction of intraocular pressure.

Rhopressa and Vyzulta are recently approved glaucoma drugs which block the Rho pathway and stimulate the eNOS pathway, respectively.

Inhibition of VE-PTP should provide both benefits, blocking Rho and stimulating eNOS.

Evidence Supporting VE-PTP Inhibition as a conventional outflow target

Preclinical Data Supporting Topical Ocular Delivery of AKB-9778:

The AKB-9778 topical formulation was well tolerated, and exposure was demonstrated in the aqueous humor following two days of three times a day 30 μL topical ocular administration to both eyes of New Zealand White rabbits.

These data suggest that a topical ocular formulation of AKB-9778 may be sufficient to deliver AKB-9778 to target ocular tissues with acceptable tolerability.

The AKB-9778 topical ocular formulation was also well tolerated following seven days of once daily ( “ QD ” ) and twice daily ( “ BID ” ) , 30 μL topical ocular administration to bo th eyes in New Zealand White Rabbits with normal ocular pressure and demonstrated a dose-dependent and statistically significant reduction in IOP of both QD and BID topical ocular dosing at the highest dose level, as shown in the figure below.

Reduction in IOP persisted for at least 24 hours following the last dosing period and the treatment was well-tolerated with no visible irritation or hyperemia seen.

IOP effects of topical ocular compared to subcutaneous AKB-9778 in male rabbits.

High dose topical ocular (40 mg/ml) AKB-9778 administered either QD or BID reduced IOP more than low dose topical (15 mg/ml) or subcutaneous (10 mg/kg) administration BID (Day 7).

IOP effects persisted 24 hours post dose (Day 8)

To explore the mechanism of AKB-9778-mediated IOP reduction, the effect of AKB-9778 on IOP in ocular normotensive eyes of wild type C57 mice was monitored for three days after once a day topical dosing.

As shown in Figure 3A, AKB-9778 gradually decreased IOP over time, from -0.74 ± 0.43 and -1 ± 0.27 on Days 1 and 2, respectively, to -1.6 ± 0.3 mmHg on Day 3.

Since IOP lowering was maximal and significant on Day 3 ( p = 0.017), IOP was assessed at two additional time points on Day 3, 2 and 4 hours after treatment.

IOP lowering was more profound at these additional time points, with a significant decrease of ~30% (mean ± SE:

-3.85 ±1.1 mmHg at 2h and -3.1±0.6 mmHg at 4h if compared to both Day 0 pretreatment and placebo treatment;

-5.66 ± 1.0 mmHg at 2h and -4.87± 0.75 mmHg at 4h, if compared to only placebo treated eyes;

p < 0.01 by paired student t test), as shown in Figure 3B.

Effect of AKB-9778 on IOP and outflow facility in ocular normotensive mice A.

Change in IOP, comparing pre-treatment (mean ± standard error, n = 14) with treatment (placebo or AKB-9778)

Considering the known role of the Tie2 pathway in S chlemm’s canal and the critical role of the conventional outflow pathway in regulating IOP, the effect of AKB-9778 on outflow facility was assessed.

Outflow facility m easurements were conducted in mouse eyes that had been dosed for three days QD with AKB-9778 and enucleated.

As shown in Figure 3C , AKB-9778 significantly increased outflow facility compared to control by 33% (3.4 ± 0.4 vs.

2.5 ± 0.2 nl/min/mmHg, p = 0.04 7).

To determine potential conventional outflow targets of AKB-9778, VE-PTP expression was assessed in anterior eye segments of mice.

In these studies, VE-PTP was co-expressed with Tie2 in the endothelium of Schlemm’s canal by two independent approaches (VE-PTP knock-in reporter mice expressing a nuclear-localizing β-galactosidase from the endogenous VE-PTP promotor and immunohistochemistry with a monoclonal antibody against VE-PTP).

Consistent with a functional effect of VE-PTP inhibition on Tie2 activation, tyrosine phosphorylation of Tie2 was increased following a single topical ocular dose of AKB-9778.

Taken together, these data support a unique mechanism of IOP reduction where targeting VE-PTP with AKB-9778 activates Tie2 in Schlemm’s canal to enhance conventional outflow.

Clinical Results in OAG

The results of our Phase 2b (“TIME-2b”) clinical trial showed encouraging data demonstrating the potential for AKB-9778 to reduce intraocular pressure in open angle glaucoma and ocular hypertension.

The results of our Phase 2b (“TIME-2b”) clinical trial showed encouraging data demonstrating the potential for razuprotafib to reduce intraocular pressure in open angle glaucoma and ocular hypertension.

In June 2019, we initiated a double-masked, multiple-ascending dose Phase 1b trial and enrolled four cohorts of 12 subjects each.

Subjects received increasing daily doses of a topical ocular formulation of AKB-9778 or placebo for seven days.

Subjects received increasing daily doses of a topical ocular formulation of razuprotafib or placebo for seven days.

The primary endpoint of the trial was ocular safety and tolerability, with IOP lowering as the key pharmacodynamic endpoint.

In October 2019, we announced interim results from our Phase 1b clinical trial.

The unmasked interim analysis, limited to the first three cohorts, showed the topical ocular administration of AKB-9778 was well tolerated.

Compared to placebo, there was a dose dependent increase in minimal to mild conjunctival hyperemia with AKB-9778, which was transient and generally considered non-adverse, and a time and dose dependent reduction in IOP that, in the highest QD dose cohort peaked at 4 hours post-dose and was sustained through eight hours on day 7, returning to baseline levels at 24 hours post-dose.

The unmasked interim analysis, limited to the first three cohorts, showed the topical ocular administration of razuprotafib was well tolerated.

Compared to placebo, there was a dose dependent increase in minimal to mild conjunctival hyperemia with razuprotafib, which was transient and generally considered non-adverse, and a time and dose dependent reduction in IOP that, in the highest QD dose cohort peaked at 4 hours post-dose and was sustained through eight hours on day 7, returning to baseline levels at 24 hours post-dose.

Based on these data, a fifth cohort of 43 patients was recruited with OHT/POAG and baseline IOP measurements between 17 and 27 mmHg while treated with once-daily prostaglandin therapy.

Patients were randomized 3:1 to receive either AKB-9778 (32 subjects) or placebo (11 subjects), administered in the morning for 7 days, while continuing their evening prostaglandin therapy.

Patients were randomized 3:1 to receive either razuprotafib (32 subjects) or placebo (11 subjects), administered in the morning for 7 days, while continuing their evening prostaglandin therapy.

Conjunctival hyperemia, IOP, safety and pilot efficacy were assessed in the same manner as described for cohorts one to four.

In January 2020, we announced the results of the fifth cohort of subjects noting subjects in cohort five randomized to the active arm exhibited statistically significant decreases in IOP at all post-AKB-9778 administration time points on both days 1 and 7 compared with day -1 baseline values when they were being treated with prostaglandin alone (Figure 4:

Diurnal = mean IOP of 2, 4 and 8 hour time points;

** p < 0.05, *** p < 0.001).

AKB 9778 significantly reduces IOP in patients on standard of care prostaglandin

When the change is placebo-corrected, AKB-9778 plus prostaglandin versus prostaglandin alone produced a statistically significant decrease in IOP on Day 7 at 0, 4 and 8 hours post dose as compared to placebo (placebo-adjusted data at 0 hrs.

-2.26 mmHg, p = 0.007;

2 hrs.-1.24, p = 0.138;

We believe these results suggest a persistent IOP-lowering activity from adding AKB-9778 to standard-of-care prostaglandin therapy.

Topical ocular administration of AKB-9778 was well tolerated over seven days in cohort five.

In the active arm treated with AKB-9778 plus prostaglandin, 21.9% of subjects experienced hyperemia compared with 9.1% of subjects in the prostaglandin-alone arm.

In January 2020, we announced the results of the fifth cohort of subjects noting subjects in cohort five randomized to the active arm exhibited statistically significant decreases in IOP at all post- razuprotafib administration time points on both days 1 and 7 compared with day -1 baseline values when they were being treated with prostaglandin alone.

Topical ocular administration of razuprotafib was well tolerated over seven days in cohort five .

In the active arm treated with razuprotafib plus prostaglandin, 21.9% of subjects experienced hyperemia compared with 9.1% of subjects in the prostaglandin-alone arm.

In all cases, this hyperemia was minimal-to-mild in severity, transient in duration and generally considered non-adverse.

There were no reports of conjunctival hemorrhage or pain on instillation during the seven days of dosing and no systemic/non-ocular AEs were observed.

Role of Tie2 in Diabetic Vascular Complications

We initiated a Phase 2 clinical trial during the second quarter of 2020 designed to evaluate the safety and efficacy of a topical formulation of razuprotafib in approximately 195 patients followed over a 28-day period.

The primary endpoint of the study was mean diurnal IOP at 28 days in the razuprotafib treated groups compared to the latanoprost monotherapy group.

The razuprotafib once-daily (“QD”) dose group did not show a statistically significant improvement at Day 28.

Razuprotafib also produced larger IOP reductions in patients with higher starting IOP, or a 1.6 mmHg IOP reduction in patients with post wash-out IOP’s of >26 mmHg.

The razuprotafib topical drops were well tolerated in this trial.

While the trial met the primary efficacy endpoint at Day 28 with the BID group, the IOP decrease was not at a level deemed sufficient to move to Phase 3 development.

Role of Tie2 Mediated Vascular Stabilization in Diabetic Vascular Complications and in ARDS/COVID-19

Tie2 is a receptor that is normally activated in healthy blood vessels.

1 unchanged sentence

In its active state, Tie2 maintains blood vessel stability by several mechanisms, including tightening the junctions between the cells that line blood vessels, maintaining support cell coverage of blood vessels, and resisting growth signaling from proliferative cytokines.

In diabetic patients, an upregulation of VE-PTP an enzyme that inactivates Tie2, contributes to vascular destabilization.

VE-PTP is upregulated in diabetic vasculature and leads to deactivation of the Tie2 receptor

Our Solution AKB-9778

AKB-9778 works by inhibiting VE-PTP, an enzyme that is upregulated in diabetic eye disease and that is responsible for inactivating Tie2.

AKB-9778 was developed using modern drug discovery techniques such as structure-based drug design to selectively target and inhibit VE-PTP at sub-nanomolar concentrations and has a high degree of selectivity.

The potency and selectivity of AKB-9778 minimize the potential for off-target side effects.

Inhibition of the inhibitor, VE-PTP, by AKB-9778 leads to activation of Tie2.

AKB-9778 binds to and inhibits the active site of VE-PTP, resulting in Tie2 activation

We believe that AKB-9778 may hold a competitive advantage versus other product candidates that are currently in development that target other aspects of the Tie2 pathway.

In diabetic patients and in patients COVID-19, an upregulation of VE-PTP an enzyme that inactivates Tie2, may contribute to vascular destabilization.

VE-PTP is upregulated in diabetic vasculature and in hypoxic endothelial cells which is common in patients with ARDS, leading to deactivation of the Tie2 receptor

Razuprotafib works by inhibiting VE-PTP, an enzyme that is upregulated in diabetic vasculature and hypoxic endothelial cells and that is responsible for inactivating Tie2.

Razuprotafib was developed using modern drug discovery techniques such as structure-based drug design to selectively target and inhibit VE-PTP at sub-nanomolar concentrations and has a high degree of selectivity.

The potency and selectivity of razuprotafib minimize the potential for off-target side effects.

Inhibition of the inhibitor, VE-PTP, by razuprotafib leads to activation of Tie2.

Razuprotafib binds to and inhibits the active site of VE-PTP, resulting in Tie2 activation

We are aware that Roche is developing agents that inhibit Angpt-2, a natural antagonist of Tie2.

1 unchanged sentence

However, simply reducing the levels of Ang-2 has no effect on the activity of VE-PTP, which inactivates Tie2 further downstream of Angpt 1/2 binding.

Inhibiting VE-PTP with AKB-9778 robustly activates Tie2 in human endothelial cells in

Inhibiting VE-PTP with razuprotafib robustly activates Tie2 in human endothelial cells in

pre-clinical experiments (Shen et al.

JCI 124:4564-76, 2014)

Other Potential Systemic Indication s – Diabetic Nephropathy

Systemic therapy with AKB-9778 could also provide therapeutic benefits in other areas of the body affected by diabetes, including in the kidneys and other organ systems.

Role of Tie2 in ARDS in COVID-19 Infections

Preclinical models, large human observational studies, and human genetic studies from leading groups worldwide have independently arrived at the concept that a vascular endothelial receptor, Tie2, may play a pivotal role in the defense against microvascular breach in ARDS.

We hypothesize that razuprotafib, being developed as a Tie2 activating compound, could exhibit an acceptable safety profile and show therapeutic promise in the treatment of COVID-19 associated ARDS as a potentially life-saving therapeutic for patients suffering from the devasting respiratory effects of COVID-19.

Starting in 2020, we initiated two Phase 2 clinical trials in C OVID -19 patients.

One with Quantum Leap Healthcare Collaborative to participate in the I-SPY COVID Trial (Investigation of Serial studies to Predict Your COVID Therapeutic Response with biomarker Integration and Adaptive Learning ) to evaluate subcutaneous razuprotafib for the treatment of COVID-19 related ARDS in adult patients with critical COVID-19 and one with the military, called RESCUE , to evaluate subcutaneous razuprotafib for the prevention and treatment of ARDS in adult patients with moderate to severe COVID-1 9 as part of the MTEC-20-09-COVID-19 Treatment Military Infectious Disease Research Program (“MIDRP ”) .

The I-SPY COVID platform trial includes a study arm that evaluated razuprotafib’s potential to sufficiently stabilize the pulmonary vasculature, in order to slow or prevent the progression of COVID-19 associated pulmonary pathology, decrease the need for ventilator support, and reduce mortality.

The I-SPY COVID study of razuprotafib was stopped after 21 patients in January 2021 due to the complexity of monitoring patients in the setting of a surge in ICU patients.

In the military sponsored RESCUE trial, we are evaluating razuprotafib for the potential to exhibit an acceptable safety profile and show efficacy for treatment of ARDS in patients with moderate to severe COVID-19;

potentially being a life-saving therapeutic for service members in the field suffering from the devasting respiratory and vascular effects of COVID-19.

The RESCUE clinical trial was initiated during the third quarter of 2020 but in February 2021, we decided to stop recruiting after the first 31 patients were enrolled based on challenges recruiting and monitoring patients in the current pandemic environment.

There were no apparent safety signals associated with dosing COVID-19 patients in the RESCUE trial and we plan to further analyze the data to assess trends in efficacy and biomarkers.

We expect to report top-line data in the second quarter of 2021.

Other Potential Systemic Indications – Diabetic Nephropathy

Systemic therapy with razuprotafib could also provide therapeutic benefits in other areas of the body affected by diabetes, including in the kidneys and other organ systems.

Treatment that could affect vascular compromise in these tissues could potentially prevent or delay the need for more extreme interventions such as kidney dialysis or amputation.

AKB-9778 showed encouraging data in a number of prespecified, key secondary endpoints, consistent with the observations in the prior Phase 2a (“TIME-2”) trial related to the changes in UACR, a measure of kidney function.

Razuprotafib showed encouraging data in a number of prespecified, key secondary endpoints, consistent with the observations in the prior Phase 2a (“TIME-2”) trial related to the changes in UACR, a measure of kidney function.

ARP-1536 is a humanized monoclonal antibody currently in preclinical development that is directed at the same target as subcutaneous AKB-9778.

ARP-1536 is a humanized monoclonal antibody currently in preclinical development that is directed at the same target as subcutaneous razuprotafib.

ARP-1536 binds the extracellular domain of VE-PTP inhibiting its ability to interact with Tie2.

Our preclinical development program has shown that inhibiting VE-PTP with an antibody results in an activity profile similar to AKB-9778.

Our preclinical development program has shown that inhibiting VE-PTP with an antibody results in an activity profile similar to razuprotafib.

We are evaluating development options for ARP-1536, including subcutaneous injection for the treatment of diabetic vascular complications, e.g.

6 unchanged sentences

We believe this bispecific antibody has the potential to be an improved treatment for wet AMD and diabetic macular edema via intravitreal injection.

AKB-4924 for Inflammatory Bowel Disease

AKB-4924 (now called GB004), a selective stabilizer of HIF-1 alpha, works by inhibiting HIF prolyl-hydroxylase enzymes.

License Agreement with Gossamer

In June 2018, we entered into a license agreement (the “Gossamer License Agreement”) with a wholly-owned subsidiary of Gossamer, under which we granted Gossamer an exclusive, sublicensable license to develop and commercialize AKB-4924 (now called GB004) and other structurally related products worldwide, with initial development expected in the indications of induction and maintenance in ulcerative colitis and Crohn’s Disease (collectively “initial indications”).

GB004, a selective stabilizer of HIF-1 alpha, works by inhibiting HIF prolyl-

hydroxylase enzymes.

Unlike other compounds currently in development that act broadly against all forms of HIF, GB004 selectively stabilizes a specific form of HIF, HIF-1 alpha.

1 unchanged sentence

However, HIF-1 alpha differs from HIF-2, in that it does not stimulate the formation of new red blood cells.

Gossamer has completed the Phase 1 multiple ascending dose (“MAD”) clinical study and is currently running a Phase 1b clinical study in ulcerative colitis patients.

Gossamer is expected to have results of the Phase 1b study in ulcerative colitis patients in the first half of 2020.

Gossamer is responsible for all remaining development and commercial activities for GB004.

License Agreement

In June 2018, we entered into a license agreement with a wholly-owned subsidiary of Gossamer under which we granted Gossamer an exclusive, sublicensable license to develop and commercialize AKB-4924 and other structurally related products worldwide, with initial development expected in the indications of induction and maintenance in ulcerative colitis and Crohn’s Disease (“Gossamer License”).

Gossamer reported topline results from the Phase 1b study in ulcerative colitis patients in the second quarter of 2020 and announced, subject to developments in the ongoing COVID-19 pandemic, it initiated a 12-week Phase 2 study of GB004 in patients with mild-to-moderate ulcerative colitis during the second half of 2020.

Gossamer is expected to have results of the Phase 2 study in ulcerative colitis patients in the first half of 202 2 .

Gossamer is responsible for the further development and commercialization of the licensed products, and a joint development committee has been formed to oversee the development and manufacturing activities related to the licensed products.

Pursuant to the terms of the agreement, Gossamer paid an upfront payment to us of $20 million.

We are also eligible to receive up to $55 million in development milestone payments, up to $85 million in commercial milestone payments, and up to $260 million in sales milestone payments, with such payments contingent on the achievement of specified milestones with respect to the first licensed product for each of the first two initial indications.

We are also eligible to receive tiered royalties on sales of licensed products at percentages ranging from a high-single-digit to mid-teens, subject to certain customary reductions.

In addition, under certain circumstances, in lieu of receiving the foregoing milestone payments and royalties, we may elect to receive a specified percentage of payments received by Gossamer and its stockholders (with some exclusions) in connection with Gossamer’s grant of a sublicense or other rights to the licensed products or if Gossamer undergoes a change of control and the value of the transaction exceeds a certain value (provided that Gossamer can prevent us from exercising this option if the parent company of Gossamer is the entity undergoing the change of control).

Conversely, we could be required to accept such a specified percentage of those payments, if Gossamer agrees to pay us a certain minimum upon Gossamer and its stockholders being paid.

Such amount may be reduced if the subject transaction includes pharmaceutical candidates or products or other named asset categories in addition to the licensed products.

The agreement expires on a licensed product-by-licensed product and countr y-by-country basis on the later of fifteen years from the date of 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 agreement for an uncured material breach by the other party or upon the bankruptcy or insolvency of the other party.

Gossamer may terminate the agreement in the event Gossamer determines there is a potential safety or efficacy issue with the licensed products.

We may terminate the agreement if Go ssamer institutes certain actions related to the licensed patents.

On May 12, 2020, the Company entered into Amendment No.

1 to the Gossamer License Agreement (“Amendment No.

Pursuant to Amendment No.

1, Gossamer made a payment to the Company of $15.0 million on May 12, 2020.

For the year ended December 31, 2020, the Company recognized revenue of $15.0 million based on the terms of Amendment No.

No such revenue was recognized during the year ended December 31, 2019.

Under the terms of the Gossamer License Agreement and as amended by Amendment No.

1 (collectively, the “Amended Gossamer License Agreement”), Gossamer is obligated to use its commercially reasonable efforts to develop and commercialize licensed products in the United States, two major European countries and Japan for at least one of the initial indications.

The Amended Gossamer License Agreement includes an exclusivity provision that prohibits us from developing, manufacturing or commercializing, and prohibits Gossamer from clinically developing or commercializing certain HIF stabilizing compounds other than as permitted in the Amended Gossamer License Agreement.

Under the terms of the Amended Gossamer License Agreement, we are eligible to receive up to $40.0 million in approval milestone payments related to indications in ulcerative colitis and Crohn’s disease, and up to $50.0 million in sales milestone payments.

The Company is also eligible to receive the tiered royalties on sales of licensed products from percentages ranging from a low-single-digit to mid-single-digit, subject to certain customary reductions.

In addition, under certain circumstances, in lieu of receiving the foregoing milestone payments and royalties, the Company may elect to receive 20% of payments received by Gossamer and its stockholders (with some exclusions) in connection with Gossamer’s grant of a sublicense or other rights to the licensed products or if Gossamer undergoes a change of control and the value of the transaction exceeds a certain value (provided that Gossamer can prevent the Company from exercising this option if the parent company of Gossamer is the entity undergoing the change of control, in which case each of the royalty rate percentages described above would automatically be increased by low single digits).

Conversely, the Company could be required to accept such 20% of those payments if Gossamer agrees to pay the Company a certain minimum upon Gossamer and its stockholders being paid.

Such amount may be reduced if the transaction includes pharmaceutical candidates or products or other named asset categories in addition to the licensed products.

The Amended Gossamer License Agreement expires on a licensed-product-by-licensed-product and country-by-country basis on the later of fifteen years from the date of 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 Amended Gossamer License Agreement for an uncured material breach by the other party or upon the bankruptcy or insolvency of the other party.

Gossamer may terminate the Amended Gossamer License Agreement in the event Gossamer determines there is a potential safety or efficacy issue with the licensed products.

We may terminate the Amended Gossamer License Agreement if Gossamer institutes certain actions related to the licensed patents.

Under certain termination circumstances, we would have worldwide rights to the terminated program.

As of December 31, 2020 and 2019, all development milestones, sales-based milestones and royalty payments within the Amended Gossamer License Agreement are constrained to the point where no transaction price has been allocated to the future milestones or royalty payments.

Intellectual Property

1 unchanged sentence

patents, at least 32 pending U.S.

provisional or non-provisional patent applications, at least 274 foreign patents and at least 103 pending foreign applications, with claims directed toward various aspects of our product candidates and research programs, not counting patents and patent applications that have been licensed to a third party.

provisional or non-provisional patent applications, at least 286 foreign patents and at least 94 pending foreign applications, with claims directed toward various aspects of our product candidates and research programs, not counting patents and patent

applications that have been licensed to a third party.

Specifically, the claims of these patents and patent applications include compositions of matter, methods of use, drug product formulations, and methods of manufacture.

5 unchanged sentences

patents, at least 25 pending U.S.

provisional or non-provisional patent applications, at least 230 foreign patents and at least 67 pending foreign applications that are directed toward AKB-9778 and formulations, medicinal chemistry variants or uses thereof.

provisional or non-provisional patent applications, at least 234 foreign patents and at least 62 pending foreign applications that are directed toward razuprotafib and formulations, medicinal chemistry variants or uses thereof.

Such patents claiming compositions of matter directed toward ARP-1536 are set to expire in 2027, without taking into account any possible patent term adjustments or extensions.

Such patents claiming compositions of matter directed toward AKB-9778 are set to expire in 2027, without taking into account any possible patent term adjustments or extensions.

Such patents claiming compositions of matter directed toward razuprotafib are set to expire in 2027, without taking into account any possible patent term adjustments or extensions.

The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products.

1 unchanged sentence

Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.

There are a number of currently marketed products and product candidates in preclinical research and clinical development by third parties to treat the various diseases that we are targeting.

If AKB-9778 and our other product candidates are approved for the indications that we are targeting, they will compete with the products and product candidates discussed below.

AKB-9778 is the only Tie2 activators in clinical development for OHT or OAG.

Other conventional outflow targeted therapies include the once-daily 0.02% eye drop (Rhopressa (netarsudil) by Aerie Pharmaceuticals) and the once-daily netarsudil 0.02%/latanoprost 0.005% eye drop (Roclatan (netarsudil + latanoprost) by Aerie Pharmaceuticals).

Sales and Marketing

We hold worldwide commercialization rights to all of our product candidates.

Subject to receiving marketing approval, we intend to independently pursue the commercialization of AKB-9778 in the United States for our product candidates by building a focused sales and marketing organization.

We believe that such an organization will be able to address the community of physicians who are key specialists in treating the patient populations for which our product candidates are being developed.

We also plan to build a marketing and sales management organization to create and implement marketing strategies for any products that we market through our own sales organization and to oversee and support our sales force.

The responsibilities of the marketing organization would include developing educational initiatives with respect to approved products and establishing relationships with researchers and practitioners in relevant fields of medicine.

Outside of the United States, we intend to pursue the approval and commercialization of our product candidates through strategic collaborations.

We are evaluating our development options for our product candidates and, if any receive marketing approval, we may seek to commercialize such candidates independently or in collaboration with one or more third parties.

Manufacturing

We do not currently own or operate manufacturing facilities for the production of clinical or commercial quantities of our product candidates.

We have relied on and intend to continue to rely on qualified third-party contract manufacturers to produce our product candidates, including clinical supplies to support our clinical trials.

We have relied on and intend to continue to rely on qualified third-party contract manufacturers to produce our product candidates.

We expect that commercial quantities of any compound and materials for our product candidates, if approved, will be manufactured in facilities and by processes that comply with FDA and other regulations.

6 unchanged sentences

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and its implementing regulations, and biologics under the FDCA and the Public Health Service Act (“PHSA”) and its implementing regulations.

FDA approval is required before any new unapproved drug or biologic or dosage form, including a new use of a previously approved drug, can be marketed in the United States.

FDA approval is required before any new unapproved drug or biologic, including a new use of a previously approved drug, can be marketed in the United States.

Drugs and biologics are also subject to other federal, state, and local statutes and regulations.

If we fail to comply with applicable FDA or other requirements at any time during the product development process, clinical testing, the approval process or after approval, we may become subject to administrative or judicial sanctions.

These sanctions could include the FDA’s refusal to approve pending applications, license suspension or revocation, withdrawal of an approval, untitled or warning letters, voluntary or mandatory product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties or criminal prosecution.

These sanctions could include the FDA’s refusal to approve pending applications, license suspension or revocation, withdrawal of an approval, untitled or

warning letters, voluntary or mandatory product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties or criminal prosecution.

Any FDA enforcement action could have a material adverse effect on us.

10 unchanged sentences

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

Preclinical Studies

Before testing any drug or biologic in humans, the product candidate must undergo rigorous preclinical, or nonclinical, testing.

Preclinical studies include laboratory evaluations of chemistry, formulation and stability, as well as in vitro and animal studies to assess safety and in some cases to establish the rationale for therapeutic use.

The conduct of preclinical studies is subject to federal and state regulations and requirements, including GLP requirements for safety and toxicology studies.

In the United States, the results of the preclinical studies, together with manufacturing information and analytical data must be submitted to the FDA as part of an IND.

An IND is a request for authorization from the FDA to administer an investigational new drug or biological product to humans in clinical trials.

16 unchanged sentences

Although the phases are usually conducted sequentially, they may overlap or be combined.

The drug or biological product is initially introduced into healthy human subjects or patients with the target disease or condition.

The investigational product is initially introduced into a limited population of healthy human subjects or patients with the target disease or condition.

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

The investigational product is administered to a limited patient population to evaluate dosage tolerance and optimal dosage, identify possible adverse side effects and safety risks, and preliminarily evaluate efficacy.

The investigational product is administered to an expanded patient population, generally at geographically dispersed clinical trial sites to generate enough data to statistically evaluate dosage, clinical effectiveness and safety (or safety, purity, and potency for biological products), to evaluate the overall benefit-risk profile of the investigational product, and to provide an adequate basis for physician labeling.

The investigational product is administered to an expanded patient population, generally at geographically dispersed clinical trial sites to generate enough data to statistically evaluate dosage, clinical effectiveness and safety (or safety, purity, and potency for biological product candidates), to evaluate the overall benefit-risk profile of the investigational product, and to provide an adequate basis for physician labeling.

Generally, two adequate and well-controlled Phase 3 clinical trials are required by the FDA for approval of a BLA or NDA.

In some cases, the FDA may condition approval of a BLA or NDA for a product candidate on the sponsor’s agreement to conduct additional clinical trials after approval.

1 unchanged sentence

Such post-approval studies are typically referred to as Phase 4 clinical trials.

Sponsors must also report to the FDA, within certain timeframes, serious and unexpected adverse reactions, any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator’s brochure, or any findings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the product candidate.

Failure to exhibit due diligence with regard to conducting required Phase 4 clinical trials could result in withdrawal of approval for products.

Sponsors must also submit progress reports detailing the results of the clinical trials, among other information, at least annually to the FDA, and written IND safety reports must be submitted to the FDA and the investigators 15 days after the trial sponsor determines the information qualifies for reporting for serious and unexpected adverse reactions, any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigator’s brochure, or any findings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the product candidate.

Sponsors must also notify the FDA of any unexpected fatal or life-threatening suspected adverse reactions as soon as possible but in no case later than 7 calendar day after the sponsor’s initial receipt of the information.

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

2 unchanged sentences

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

A manufacturer of an investigational drug for a serious disease or condition is required to make available, such as by posting on its website, i ts policy on evaluating and responding to requests for individual patient access to such investigational drug.

A manufacturer of an investigational drug or biological product for a serious disease or condition is required to make available, such as by posting on its website, its policy on evaluating and responding to requests for individual patient access to such investigational drug or biological product .

This requirement applies on the earlier of the first initiation of a Phase 2 or Phase 3 trial of the investigational drug or, as applicable, 15 days after the drug receives a designation as a breakthrough therapy, fast track product, or regenerative advanced therapy.

Submission of a BLA or NDA to the FDA

Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, detailed investigational new drug product information is submitted to the FDA in the form of a BLA or NDA requesting approval to market the product for one or more indications.

Assuming successful completion of all required testing in accordance with all applicable regulatory requirements, detailed investigational new drug product informati on is submitted to the FDA in the form of a BLA or NDA requesting approval to market the product for one or more indications.

Under federal law, the submission of most BLAs and NDAs is subject to an application user fee.

5 unchanged sentences

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

The FDA conducts a preliminary review of all NDAs and BLAs within the first 60 days after submission before accepting them for filing to determine whether they are sufficiently complete to permit substantive review.

The FDA conducts a preliminary review of all BLAs and NDAs within the first 60 days after submission before accepting them for filing to determine whether they are sufficiently complete to permit substantive review.

The FDA may request additional information rather than accept an application for filing.

14 unchanged sentences

The FDA could also approve the BLA or NDA with a Risk Evaluation and Mitigation Strategy (“REMS”) program to mitigate risks, which could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools.

The FDA also may condition approval on, among other things, changes to proposed labeling, development of adequate controls and specifications, or a commitment to conduct one or more post-market studies or clinical trials.

The FDA also may condition approval on, among other things, changes to proposed labeling, development of adequate controls and

specifications, or a commitment to conduct one or more post-market studies or clinical trials.

Such post-market testing may include Phase 4 clinical trials and surveillance to further assess and monitor the product’s safety and effectiveness after commercialization.

2 unchanged sentences

A sponsor may seek approval of its product candidate under programs designed to accelerate FDA’s review and approval of BLAs and NDAs.

For example, Fast Track Designation may be granted to a drug intended for treatment of a serious or life-threatening disease or condition that has potential to address unmet medical needs.

For example, Fast Track Designation may be granted to a drug or biologic intended for treatment of a serious or life-threatening disease or condition that has potential to address unmet medical needs.

The key benefits of Fast Track Designation are more frequent interactions with the FDA during development and testing, the eligibility for priority review, and rolling review, which is submission of portions of an application before the complete marketing application is submitted.

5 unchanged sentences

Post-marketing trials or completion of ongoing trials after marketing approval are generally required to verify the drug’s clinical benefit in relationship to the surrogate endpoint or ultimate outcome in relationship to the clinical benefit.

In addition, a sponsor may seek FDA designation of its product candidate as a breakthrough therapy if the drug is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.

The benefits of breakthrough therapy designation include the same benefits as a Fast Track designation, in addition to intensive guidance from FDA to ensure an efficient drug development program.

In addition, a sponsor may seek FDA designation of its product candidate as a breakthrough therapy if the drug or biologic is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.

The benefits of Breakthrough Therapy Designation include the same benefits as a Fast Track Designation, in addition to intensive guidance from FDA to ensure an efficient product development program.

Post-Approval Requirements

Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product.

Drugs and biologics manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product.

After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval.

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

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

Changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require prior FDA approval before being implemented.

1 unchanged sentence

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

We rely, and expect to continue to rely, on third parties for the production of clinical quantities of our product candidates and expect to rely in the future on third parties for the production of commercial quantities.

Future FDA and state inspections may identify compliance issues at our facilities or at the facilities of our contract manufacturers that may disrupt production, or distribution, or may require substantial resources to correct.

In addition, discovery of previously unknown problems with a product or the failure to comply with applicable requirements may result in restrictions on a product, manufacturer or holder of an approved BLA or NDA, including withdrawal or recall of the product from the market or other voluntary, FDA-initiated or judicial action that could delay or prohibit further marketing.

The FDA may withdraw approval if compliance with regulatory requirements and standards is not ma intained or if problems occur after the product reaches the market.

Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with r egulatory requirements, may result in revisions to the approved labeling to add new safety information;

withdrawal or recall of the product from the market or other voluntary, FDA-initiated or judicial action that could delay or prohibit further marketing.

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

Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information;

imposition of post-market studies or clinical trials to assess new safety risks;

or imposition of distribution restrictions or other restrictions under a REMS program.

FDA has authority to require post-market studies, in certain circumstances, on reduced effectiveness of a drug and FDA may require labeling changes related to new reduced effectiveness information.

FDA has authority to require post-market studies, in certain circumstances, on reduced effectiveness of a drug or biologic and FDA may require labeling changes related to new reduced effectiveness information.

Other potential consequences of a failure to maintain regulatory compliance include, among other things:

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

safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety information about the product;

mandated modification of promotional materials and labeling and issuance of corrective information;

fines, untitled or warning letters or holds on post-approval clinical trials;

2 unchanged sentences

injunctions or the imposition of civil or criminal penalties;

consent decrees, corporate integrity agreements, debarment or exclusion from federal healthcare programs.

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

2 unchanged sentences

Pediatric Trials and Exclusivity

A sponsor who is planning to submit a marketing application for a drug that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration must submit an initial Pediatric Study Plan (“PSP”) within sixty days of an end of Phase 2 meeting or as may be agreed between the sponsor and FDA.

A sponsor who is planning to submit a marketing application for a drug that includes a new active ingredient, new indication, new dosage form, new dosing regimen or new route of administration must submit an initial Pediatric Study Plan (“PSP”) within 60 days of an end of Phase 2 meeting or as may be agreed between the sponsor and FDA.

The initial PSP must include an outline of the pediatric study or studies that the sponsor plans to conduct, including study objectives and design, age groups, relevant endpoints and statistical approach, or a justification for not including such detailed information, and any request for a deferral of pediatric assessments or a full or partial waiver of the requirement to provide data from pediatric studies along with supporting information.

32 unchanged sentences

In addition, by operation of certain state laws and numerous health insurance programs, the FDA’s designation of an “A” rating often results in substitution of the generic drug without the knowledge or consent of either the prescribing physician or patient.

The FDCA provides a period of f ive years of non-patent exclusivity for a new drug containing a new chemical entity.

In cases where such exclusivity has been granted, an ANDA (or a 505(b)(2) NDA, which is a marketing application in which sponsors may rely on investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted) may not be filed with the FDA until the expiration of five years unless the submiss ion is accompanied by a Paragraph IV certification, discussed below, in which case the applicant may submit its application four years following the original product approval.

The FDCA also provides for a period of three years of exclusivity if the NDA inc ludes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant and are essential to the approval of the application.

This three-year exclusivity period often prote cts changes to a previously approved drug product, such as a new dosage form, route of administration, combination or indication.

The FDCA provides a period of five years of non-patent exclusivity for a new drug containing a new chemical entity.

In cases where such exclusivity has been granted, an ANDA (or a 505(b)(2) NDA, which is a marketing application in which sponsors may rely on investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted) may not be filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification, discussed below, in which case the applicant may submit its application four years following the original product approval.

The FDCA also provides for a period of three years of exclusivity if the NDA includes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant and are essential to the approval of the application.

This three-year exclusivity period often protects changes to a previously approved drug product, such as a new dosage form, route of administration, combination or indication.

Hatch-Waxman Patent Certification and the 30-Month Stay

15 unchanged sentences

The cost of establishing a regulatory compliance system for numerous varying jurisdictions can be very significant.

Although many of the issues discussed above with respect to the United States apply similarly in the context of the European Union and in other jurisdictions, the approval process varies between countries and jurisdictions and can involve additional product testing and additional administrative review periods.

product testing and additional administrative review periods.

The time required to obtain approval in other countries and jurisdictions might differ from and be longer than that required to obtain FDA approval.

Regulatory approval in one country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatory process in others.

Whether or not we obtain FDA approval for a product, we must obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries.

Certain countries outside of the United States have a simila r process that requires the submission of a clinical trial application much like the IND prior to the commencement of human clinical trials.

In the European Union, for example, a clinical trial authorization application ( “ CTA ” ) , must be submitted for each clinical protocol to each country’s national health authority and an independent ethics committee, much like the FDA and IRB, respectively.

Once the CTA is accepted in accordance with a country’s requirements, the clinical trial may proceed.

The requirements and process governing the conduct of clinical trials vary from country to country.

In all cases, the clinical trials are conducted in accordance with GCP, the applicable regulatory requirements, and the ethical principles that have their origin in the Declaration of Helsinki.

To obtain regulatory approval of an investigational medicinal product under European Union regulatory systems, we must submit a marketing authorization application.

The content of the BLA or NDA filed in the United States is similar to that required in the European Union, with the exception of, among other things, country-specific document requirements.

For other countries outside of the European Union, such as countries in Eastern Europe, Latin America or Asia, the requirements governing product licensing, pricing, and reimbursement vary from country to country.

Countries that are part of the European Union, as well as countries outside of the European Union, have their own governing bodies, requirements, and processes with respect to the approval of pharmaceutical and biologic products.

If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

Authorization Procedures in the European Union

Medicines can be authorized in the European Union by using either the centralized authorization procedure or national authorization procedures.

If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension of clinical trials, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.

European Union Clinical Trials Regulation

Certain countries outside of the United States have a similar process that requires the submission of a clinical trial application much like the IND prior to the commencement of human clinical trials.

In the European Union, for example, a clinical trial authorization application (“CTA”), must be submitted for each clinical protocol to each country’s National Competent Authority, or NCA, and at least one independent Ethics Committee, or EC, much like the FDA and IRB, respectively.

Once the CTA is accepted in accordance with a country’s requirements, the clinical trial may proceed.

Under the current regime (the EU Clinical Trials Directive 2001/20/EC and corresponding national laws) all suspected unexpected serious adverse reactions to the investigated drug that occur during the clinical trial have to be reported to the NCA and ECs of the Member State where they occurred.

In April 2014, the European Union adopted a new Clinical Trials Regulation (EU) No 536/2014, which is set to replace the current Clinical Trials Directive 2001/20/EC.

It will overhaul the current system of approvals for clinical trials in the European Union.

Specifically, the new regulation, which will be directly applicable in all Member States (meaning that no national implementing legislation in each European Union Member State is required), aims at simplifying and streamlining the approval of clinical trials in the European Union.

For instance, the new Clinical Trials Regulation provides for a streamlined application procedure via a single entry point and strictly defined deadlines for the assessment of clinical trial applications.

It is expected that the new Clinical Trials Regulation (EU) No 536/2014 will come into effect following confirmation of full functionality of the Clinical Trials Information System, the centralized European Union portal and database for clinical trials foreseen by the new Clinical Trials regulation, through an independent audit, which is currently expected to occur in December 2021.

Drug Review and Approval in Europe

In the European Economic Area (comprised of the Member States of the European Union plus Norway, Iceland, and Lichtenstein), or EEA , medicinal products are subject to extensive pre- and post-market regulation by regulatory authorities at both the EEA and national levels.

Before being placed on the market in the UK or EEA, a medicinal product requires a marketing authorization from the relevant competent authority.

Medicines can be authorized in the EEA by using either the centralized authorization procedure or national authorization procedures.

Centralized procedure.

The European Medicines Agency (“ EMA”), implemented the centralized procedure for the approval of human medicines to facilitate marketing authorizations that are valid throughout the European Economic Area (“EEA”) which is comprised of the 28-member states of the European Union plus Norway, Iceland, and Lichtenstein.

The European Medicines Agency (“ EMA”), implemented the centralized procedure for the approval of human medicines to facilitate marketing authorizations that are valid throughout the EEA.

This procedure results in a single marketing authorization issued by the EMA that is valid across the EEA.

The centralized procedure is compulsory for human medicines that are:

derived from biotechnology processes, such as genetic engineering, contain a new active substance indicated for the treatment of certain diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative disorders or autoimmune diseases and other immune dysfunctions, and officially designated orphan medicines.

For medicines that do not fall within these categories, an applicant has the option of submitting an application for a centralized marketing authorization to the European Commission following a favorable opinion by the EMA, as long as the medicine concerned is a significant therapeutic, scientific or technical innovation, or if its authorization would be in the interest of public health.

derived from biotechnology processes, such as genetic engineering, designated as orphan medicinal products, advanced therapy medicinal products (gene therapy, somatic cell therapy and tissue-engineered products) and contain a new active substance indicated for the treatment of certain diseases, such as HIV/AIDS, cancer, diabetes, neurodegenerative disorders or autoimmune diseases and other immune dysfunctions and viral diseases.

is a significant therapeutic, scientific or technical innovation, or if its authorization would be in the interest of public health.

National authorization procedures.

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

There are also two other possible routes to authorize medicinal products in several EEA countries, which are available for investigational medicinal products that fall outside the scope of the centralized procedure:

Decentralized procedure.

Using the decentralized procedure, an applicant may apply for simultaneous authorization in more than one European Union country of medicinal products that have not yet been authorized in any European Union country and that do not fall within the mandatory scope of the centralized procedure.

Under the decentralized procedure, an applicant may apply for simultaneous authorization in more than one EEA country of medicinal products that have not yet been authorized in any EEA country and that do not fall within the mandatory scope of the centralized procedure.

Mutual recognition procedure.

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

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

In some cases, a Pediatric Investigation Plan (“PIP”) or a request for waiver or deferral, is required for submission prior to submitting a marketing authorization application.

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

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

Now that the United Kingdom (which comprises Great Britain and Northern Ireland) has left the European Union, Great Britain will no longer be covered by centralized marketing authorizations (under the Northern Irish Protocol, centralized marketing authorizations will continue to be recognized in Northern Ireland).

All medicinal products with a current centralized marketing authorization were automatically converted to Great Britain marketing authorizations on January 1, 2021.

For a period of two years from January 1, 2021, the Medicines and Healthcare products Regulatory Agency, or MHRA, the United Kingdom medicines regulator, may rely on a decision taken by the European Commission on the approval of a new marketing authorization in the centralized procedure, in order to more quickly grant a new Great Britain marketing authorization.

A separate application will, however, still be required.

Companies developing a new medicinal product must also agree upon, a Pediatric Investigation Plan (“PIP”) with the EMA’s Pediatric Committee (“PDCO”), and must conduct pediatric clinical trials in accordance with that PIP, unless a waiver applies, (e.g., because the relevant disease or condition occurs only in adults).

A PIP describes, among other things, proposed pediatric trials and their timing relative to clinical trials in adults.

New Chemical Entity Exclusivity

In the European Union, new chemical entities, sometimes referred to as new active substances, qualify for eight years of data exclusivity upon marketing authorization and an additional two years of market exclusivity.

These data exclusivity, if granted, prevents regulatory authorities in the European Union from referencing the innovator’s data to assess a generic (abbreviated) application for eight years, after which generic marketing authorization can be submitted, and the innovator’s data may be referenced, but not approved for two years.

The marketing authorization application for the product must include the results of pediatric clinical trials conducted in accordance with the PIP, unless a waiver applies, or a deferral has been granted by the PDCO of the obligation to implement some or all of the measures of the PIP until there are sufficient data to demonstrate the efficacy and safety of the product in adults, in which case the pediatric clinical trials must be completed at a later date.

Products that are granted a marketing authorization with the results of the pediatric clinical trials conducted in accordance with the PIP are eligible for a six month extension of the protection under a supplementary protection certificate (if any is in effect at the time of approval) even where the trial results are negative.

In the case of orphan medicinal products, a two year extension of the orphan market exclusivity may be available.

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

Data and Marketing Exclusivity

In the EEA, innovative medicinal products qualify for eight years of data exclusivity upon marketing authorization and an additional two years of market exclusivity.

Data exclusivity, if granted, prevents generic or biosimilar applicants from referencing the innovator’s pre-clinical or clinical trial data contained in the dossier of the reference product when applying for a generic or biosimilar marketing authorization for a period of eight years from the date on which the reference product was first authorized in the EEA.

During the additional two-year period of market exclusivity, a generic or biosimilar marketing authorization can be submitted, and the innovator’s data may be referenced, but no generic or biosimilar product can be marketed until the expiration of the market exclusivity period.

The overall ten-year period will be extended to a maximum of eleven years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to their authorization, are held to bring a significant clinical benefit in comparison with existing therapies.

Even if an innovative medicinal product gains the prescribed period of data exclusivity, another company may market another version of the product if such company obtained marketing authorization based on a marketing authorization application with a completely independent data package of pharmaceutical tests, preclinical tests and clinical trials.

Accelerated Review

Under the centralized procedure in the European Union, the maximum timeframe for the evaluation of a marketing authorization application 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 EMA’s Committee for Medicinal Products for Human Use (“CHMP”)).

Under the centralized procedure in the EEA, the maximum timeframe for the evaluation of a marketing authorization application is 210 days from receipt of a valid application (excluding clock stops, when additional written or oral information is to be provided by the applicant in response to questions asked by the EMA’s Committee for Medicinal Products for Human Use (“CHMP”).

Clock stops may extend the timeframe of evaluation of a marketing authorization application considerably beyond 210 days.

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

In this circumstance, EMA ensures that the opinion of the CHMP is given within 150 days, excluding clock stops.

If the CHMP accepts such a request, the timeframe of 210 days for assessment will be reduced to 150 days (excluding clock stops), but it is possible that the CHMP may revert to the standard time limit for the centralized procedure if it determines that the application is no longer appropriate to conduct an accelerated assessment.

Brexit and the Regulatory Framework in the United Kingdom

In June 2016, the electorate in the United Kingdom voted in favor of leaving the European Union (commonly referred to as “Brexit”).

Thereafter, in March 2017, the country formally notified the European Union of its intention to withdraw pursuant to Article 50 of the Lisbon Treaty, and the United Kingdom formally left the European Union on January 31, 2020.

A transition period began on February 1, 2020, during which European Union pharmaceutical law remained applicable to the United Kingdom, however this ended on December 31, 2020.

Since the regulatory framework in the United Kingdom covering quality, safety and efficacy of pharmaceutical products, clinical trials, marketing authorization, commercial sales and distribution of pharmaceutical products is derived from European Union Directives and Regulations, Brexit could materially impact the future regulatory regime which applies to products and the approval of product candidates in the United Kingdom, as United Kingdom legislation now has the potential to diverge from EU legislation.

It remains to be seen how Brexit will impact regulatory requirements for product candidates and products in the United Kingdom in the long-term.

The MHRA, the UK medicines and medical devices regulator, has recently published detailed guidance for industry and organizations to follow from January 1, 2021 now the transition period is over, which will be updated as the UK’s regulatory position on medicinal products evolves over time.

Pharmaceutical Coverage, Pricing and Reimbursement

10 unchanged sentences

government, state legislatures and foreign governments have shown significant interest in implementing cost containment programs to limit the growth of government-paid health care costs, including price controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs.

By way of example, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, collectively, the Affordable Care Act (“ACA”) contains provisions that may reduce the profitability of drug products, including, for example, increased rebates for drugs sold to Medicaid programs, extension of Medicaid rebates to Medicaid managed care plans, mandatory discounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies’ share of sales to federal health care programs.

Some of the provisions of the Affordable Care Act have yet to be fully implemented, while certain provisions have been subject to judicial and Congressional challenges.

For example, on January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the Affordable Care Act to waive, defer, grant exemptions from, or delay the implementation of any provision of the Affordable Care Act that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices.

Other legislative changes have been proposed and adopted since the ACA was enacted.

While Congress has not passed comprehensive repeal legislation, it has enacted laws that modify certain provisions of the ACA, including eliminating a tax-based shared responsibility payment imposed on certain individuals who fail to maintain qualifying health coverage for all or part of a year, which is commonly referred to as the “individua l mandate”.

On December 14, 2018, a U.S.

District Court judge in the Northern District of Texas ruled that the individual mandate portion of the ACA is an essential and inseverable feature of the ACA, and therefore because the mandate was no longer in effe ct, the remaining provisions of the ACA are invalid as well.

On December 18, 2019, the Fifth Circuit U.S.

Court of Appeals held the individual mandate is unconstitutional, but remanded the case to the lower court to reconsider its earlier invalidation of t he full ACA.

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

Thus, the full impact of the Affordable Care Act, or any law replacing elements of it, on our busi ness remains unclear.

Adoption of government controls and measures and tightening of restrictive policies in jurisdictions with existing controls and measures, could limit payments for pharmaceuticals.

Further, the Trump administration’s budget proposals for fiscal years 2019 and 2020 contain further drug price control measures that could be enacted during the budget process or in other future legislation, including, for example, measures to permit Medicare Part D plans to negotiate the price of certain drugs under Medicare Part B, to allow some states to negotiate drug prices under Medicaid, and to eliminate cost sharing for generic drugs for low-income patients.

Additionally, the Trump administration released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug products paid by consumers.

Department of Health and Human Services (“HHS”) has already started the process of soliciting feedback on some of these measures and, at the same time, is immediately implementing others under its existing authority.

For example, in May 2019, CMS issued a final rule to allow Medicare Advantage Plans the option of using step therapy, a type of prior authorization, for Part B drugs beginning January 1, 2020.

This final rule codified CMS’s policy change that was effective January 1, 2019.

Although a number of these, and other proposed measures may require authorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs.

extension of Medicaid rebates to Medicaid managed care plans, mandatory discounts for certain Medicare Part D beneficiaries and annual fees based on pharmaceutical companies’ share of sales to federal health care programs.

Since its enactment, there have been numerous judicial, administrative, executive, and legislative challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future.

Various portions of the ACA are currently undergoing legal and constitutional challenges in the United States Supreme Court;

the Trump Administration ha d issued various Executive Orders which eliminated cost sharing subsidies and various provisions that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices;

and Congress has introduced several pieces of legislation aimed at significantly revising or repealing the ACA.

As implementation of the ACA is ongoing, the law appears likely to continue the downward pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical 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.

30 unchanged sentences

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

HIPAA, as amended by the Health Information Technology and Clinical Health Act ( “ HITECH ” ) and its implementing regulations, which imposes certain requirements on certain covered healthcare providers, health plans, and heal thcare clearinghouses, otherwise known as covered entities, relating to the privacy, security and transmission of individually identifiable health information, including mandatory contractual terms and required implementation of technical safeguards of suc h information.

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 inj unctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions .

HIPAA, as amended by the Health Information Technology and Clinical Health Act ( “ HITECH ” ) and its implementing regulations, which imposes certain requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses, otherwise known as covered entities, relating to the privacy, security and transmission of individually identifiable health information, including mandatory contractual terms and required implementation of technical safeguards of such information.

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 the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions .

The federal transparency requirements under the Affordable Care Act, including the Physician Payment Sunshine Act, which require drug and biologics manufacturers eligible for payment under Medicare, Medicaid or the Children’s Health Insurance Program to report annually to HHS, information related to payments or other “transfers of value” made or distributed to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by the physicians described above and their immediate family members.

11 unchanged sentences

If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, including environmental, health and safety laws and regulations, we may be subject to penalties, including administrative, civil and criminal penalties, exclusion from participation in government healthcare programs, such as Medicare and Medicaid and imprisonment, damages, fines and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.

As of December 31, 2019, we had 12 full-time or part-time employees, including 5 employees with doctorate level degrees.

Of these employees, 6 employees are engaged in research and development activities and 6 employees are engaged in general and administrative activities.

Employees and Human Capital

As of December 31, 2020, we had 12 full-time or part-time employees, including five employees with doctorate level degrees.

Of these employees, six employees are engaged in research and development activities and six employees are engaged in general and administrative activities.

None of our employees are represented by labor unions or covered by collective bargaining agreements.

We consider the relationship with our employees to be good.

In January 2021, the Company initiated a realignment plan to reduce operating costs and better align its workforce with the needs of its ongoing business.

The realignment plan reduces its current workforce by 7 employees, representing approximately 58% of our workforce.

As a result of this realignment plan, we estimate we will incur one-time employee related severance expenses of approximately $1.2 million in the first quarter of 2021.

We anticipate the majority of the one-time employee severance liability to be paid during 2021.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees, advisors and consultants.

The principal purposes of our equity incentive plans are to attract, retain and reward personnel through the granting of equity-based compensation awards in order to increase shareholder value and the success of our company by motivating such individuals to perform to the best of their abilities and achieve our objectives.

Our Corporate Information

6 unchanged sentences

Immediately following the Merger, Aerpio converted into a Delaware limited liability company with the name Aerpio Therapeutics LLC.

Our corporate headquarters are located at 9987 Carver Road, Cincinnati, Ohio 45242, and our telephone number is (513) 985-1920.

Our corporate headquarters are located at 9987 Carver Road Suite 420, Cincinnati, Ohio 45242, and our telephone number is (513) 985-1920.

We maintain a website at www.aerpio.com, to which we regularly post copies of our press releases as well as additional information about us.

Our filings with the Securities and Exchange Commission (“SEC”) will be available free of charge through the website as soon as reasonably practicable after being electronically filed with or furnished to the SEC.

Information contained in our website does not constitute a part of this prospectus or our other filings with the SEC.

Our filings with the Securities and Exchange Commission (the “SEC”) will be available free of charge through the website as soon as reasonably practicable after being electronically filed with or furnished to the SEC.

Information contained in our website does not constitute a part of this Annual Report on Form 10-K or any of our other filings with the SEC unless specifically incorporated herein by reference.

In addition, our filings with the SEC may be accessed through the SEC’s Interactive Data Electronic Applications system at http://www.sec.gov.

All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by law.

Ris k Factors

4 unchanged sentences

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 losses each year since our inception, with the exception of the three months ended September 30, 2018 as a result of the upfront Gossamer payment discussed above.

For the year ended December 31, 2019, we incurred net losses of $23.3 million, compared to net loss of $10.4 million for the year ended December 31, 2018.

As of December 31, 2019, we had an accumulated deficit of $142.2 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, 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 AKB-9778 or any of our other product candidates, our future revenues will depend upon the size of any markets in which AKB-9778 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 AKB-9778 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 AKB-9778, ARP-1536 and other product candidates that we may develop or acquire;

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 pharmaceutic al product development, we are unable to accurately predict 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 expense s could increase.

The net losses 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 December 31, 2019, our cash and cash equivalents were $38.5 million.

We believe that we will continue to expend substantial resources for the foreseeable future developing AKB-9778 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 continuing our Phase 1 program of AKB-9778 for open angle glaucoma and ocular hypertension and our operating costs incurred as we conduct these trials;

the scope, size, rate of progress, results and costs of initiating and completing additional development of AKB-9778;

assuming favorable clinical results, the cost, timing and outcome of our efforts to obtain marketing approval for AKB-9778 in the United States, Europe and in other jurisdictions, including to fund the preparation and filing of regulatory submissions for AKB-9778 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 expenditure requirements at least through the second 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.

If adequate funds are not available to us on a timely basis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other development activities for AKB-9778, 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 other 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 .

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

Risks Related to Our Evaluation of Strategic Alternatives

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.

2 unchanged sentences

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.

This strategic alternative process is ongoing and, as announced in January 2021, we continue to engage Ladenburg Thalmann & Co.

and Duane Nash to assist us with this process.

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 i mpact 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, acc ounting 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 att ract, retain and motivate key employees, and could expose us to potential litigation in connection with this process or any resulting transaction.

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

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 AKB-9778, 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

We depend heavily on the success of our lead product candidate, AKB-9778.

Even if we obtain favorable clinical results, we may not be able to obtain regulatory approval for, or successfully commercialize, AKB-9778.

We rely on our lead product candidate, AKB-9778, and our business depends almost entirely on the successful clinical development, regulatory approval and commercialization of that product candidate, which may never occur.

In March 2019, we announced top line results of the Phase 2b clinical trial for AKB-9778 in the treatment of non-proliferative diabetic retinopathy.

While we believed AKB-9778 had the potential to slow down or possibly reverse retinal vascular changes caused by diabetes, the subcutaneous administration of AKB-9778 twice daily did not meet the study’s primary endpoint of the percentage of patients with an improvement of two or more steps in diabetic retinopathy severity score (DRSS) in the study eye, compared to placebo.

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

In October 2019, we announced interim results from its Phase 1b clinical trial.

The unmasked interim analysis, limited to the first three cohorts, shows the topical ocular administration of AKB-9778 was well tolerated.

Compared to placebo, there was a dose dependent increase in minimal to mild conjunctival hyperemia with AKB-9778, which was transient and generally considered non-adverse, and a time and dose dependent reduction IOP that, in the highest QD dose cohort peaked at 4 hours post-dose and was sustained through eight hours on day 7, returning to baseline levels at 24 hours post-dose.

Based on these data, a cohort of up to 36 patients with OHT/OAG (hypertensive eyes) was added to the ongoing study to assess safety and pilot efficacy in the target patient population, and results were announced in January 2020.

These results showed statistically significant decreases in IOP on Day 1 and Day 7 compared to prostaglandin alone.

When compared to placebo, AKB-9778 plus prostaglandin produced a statistically significant decrease in IOP versus prostaglandin alone on Day 7.

Topical ocular administration of AKB-9778 was well-tolerated over seven days, with 21.9% of subjects experiencing hyperemia compared with 9.1% of subjects in the prostaglandin alone arm.

If we do not successfully consummate a strategic transaction, our Board of Directors may decide to pursue a dissolution and liquidation of our company.

In such an event, the amount of cash available for distribution to our stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities.

There can be no assurance that the process to identify a strategic transaction will result in a successfully consummated transaction.

If no transaction is completed, our Board of Directors may decide to pursue a dissolution and liquidation of our Company.

In such an event, the amount of cash available for distribution to our shareholders will depend heavily on the timing of such decision and, ultimately, such liquidation, since the amount of cash available for distribution continues to decrease as we fund our operations while we evaluate our strategic alternatives.

In addition, if our Board of Directors were to approve and recommend, and our shareholders were to approve, a dissolution and liquidation of our Company, we would be required under Delaware corporate law to pay our outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to our shareholders.

Our commitments and contingent liabilities may include (i) obligations under our employment and related agreements with certain employees that provide for severance and other payments following a termination of employment occurring for various reasons, including a change in control of our Company;

(ii) potential litigation against us, and other various claims and legal actions arising in the ordinary course of business;

and (iii) non-cancelable facility lease obligations.

As a result of this

requirement, a portion of our assets may need to be reserved pending the resolution of such obligations.

In addition, we may be subject to litigation or other claims related to a dissolution and liquidation of our Company .

If a dissolution and liquidation were pursued, our Board of Directors , in consultation with its advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve.

Accordingly, holders of our common stock could lose all or a significant portion of their investment in the event of a liquidation, dissolution or winding up of our company.

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.

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 trial 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 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-essential 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:

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 Development of our Product Candidates

We depend heavily on the success of our product candidates.

Even if we obtain favorable clinical results, we may not be able to obtain regulatory approval for, or successfully commercialize any of our product candidates.

We rely on our lead product candidates, and our business depends almost entirely on the successful clinical development, regulatory approval and commercialization of such product candidates, which may never occur.

We have experienced setbacks in the development of our product candidates and we are currently evaluating our development options.

For example, in January 2021, following the announcement regarding the topline results from the Phase 2 clinical trial of razuprotafib in patients with elevated IOP associated with OAG or OHT, we initiated a process to explore a range of strategic alternatives focused on maximizing stockholder value from our clinical assets and cash resources.

While the Phase 2 trial met the primary efficacy endpoint at Day 28 with the BID group, the IOP decrease was not at a level deemed sufficient to move to Phase 3 development.

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.

In September 2020, we announced the first patient was dosed with razuprotafib in the I-SPY COVID-19 trial.

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

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.

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.

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 January 2021, the Data Monitoring Committee recommended discontinuation of razuprotafib in the I-SPY COVID-19 trial after 21 patients due to the complexity of monitoring patients in the setting of a surge in ICU patients.

There were no apparent safety signals associated with razuprotafib in these 21 patients and we believe the

scientific basis is sound for continuing to evaluate the drug in patients presenting with ARDS across a broader array of infections.

In August 2020, we announced a second COVID-19 trial to evaluate subcutaneous razuprotafib for the prevention and treatment of ARDS in adult patients with moderate to severe COVID-19 as part of the MTEC-20-09-COVID-19 Treatment Military Infectious Disease Research Program (“MIDRP”) (“RESCUE” trial).

The Medical Technology Enterprise Consortium (“MTEC”), a non-profit organization primarily funded by the U.S.

Army Medical Research and Development Command, will provide up to $5.1 million of reimbursement related to qualified internal and external spending, as it relates to the clinical trial.

In February 2021, we decided to stop recruiting after the first 31 patients were enrolled based on challenges recruiting and monitoring patients in the current pandemic environment.

There were no apparent safety signals associated with dosing COVID-19 patients in the RESCUE trial and we plan to further analyze the data to assess trends in efficacy and biomarkers.

We expect to report top-line data in the second quarter of 2021.

For both the I-SPY COVID-19 and RESCUE trials, 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.

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

AKB-9778 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 trial is initiated, if ever.

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

We are currently in preclinical development 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 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.

2 unchanged sentences

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 capital to continue to fund our development and clinical programs, we may be unable to successfully develop or commercialize AKB-9778.

We are not permitted to market AKB-9778 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.

A s a condition to submitting an NDA to the FDA for AKB-9778, we must complete our ongoing clinical trial, Phase 2 and 3 trials, and any additional nonclinical studies or clinical trials required by the FDA.

To date, we have not completed any clinical trials of AKB-9778 for open angle glaucoma or ocular hypertension.

AKB-9778 may not be successful in clinical trials or receive regulatory approval.

Further, AKB-9778 may not receive regulatory approval even if it is successful in clinical trials.

Obtaining appr oval of an NDA is a complex, lengthy, expensive and uncertain process that typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities.

In ad dition, the policies or regulations, or the type and amount of clinical data necessary to gain approval, may change during the course of a product candidate’s clinical development and may vary among jurisdictions.

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 any of our product candidates.

We are not permitted to market any of our product candidates 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.

As a condition to submitting an NDA to the FDA, we must conduct and complete further clinical trials, including Phase 3 clinical trials, and any additional nonclinical studies or clinical trials required by the FDA.

To date, we have completed only a limited number of clinical trials with our product candidates.

Obtaining approval of an NDA is a complex, lengthy, expensive and uncertain process that typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities.

In addition, the policies or regulations, or the type and amount of clinical data necessary to gain approval, may change during the course of a product candidate’s clinical development and may vary among jurisdictions.

Our development activities could be harmed or delayed by a partial shutdown of the U.S.

government, including the FDA.

We have not obtained regulatory approval for any product candidate and it is possible that AKB-9778 will never obtain regulatory approval.

The FDA may delay, limit or deny approva l of AKB-9778 for many reasons, including, among others:

we may not be able to demonstrate that AKB-9778 is safe and effective in treating patients with open angle glaucoma and ocular hypertension to the satisfaction of the FDA;

We have not obtained regulatory approval for any product candidate and it is possible that none of our product candidates will ever receive regulatory approval.

The FDA may delay, limit or deny approval of our product candidates for many reasons, including, among others:

we may not be able to demonstrate that our product candidates are safe and effective in any indications that may be pursued for the product candidate, to the satisfaction of the FDA;

the results of our clinical trials may not meet the level of statistical or clinical significance required by the FDA for marketing approval;

the FDA may disagree with the number, design, size, conduct or implementation of our clinical trials;

the FDA may not approve the formulation, labeling or specifications of AKB-9778;

the FDA may not approve the formulation, labeling or specifications of our product candidates;

the FDA may require that we conduct additional clinical trials;

4 unchanged sentences

the policies or regulations of the FDA may significantly change in a manner that renders our clinical data insufficient for approval or may require that we amend or submit new clinical protocols.

In addition, similar reasons may cause the EMA or other regulatory authorities to delay, limit or deny approval of AKB-9778 outside the United States.

Any of these factors, many of which are beyond our control, could jeopardize our ability to obtain regulatory approval for and successfully market AKB-9778.

Because our business is substantially dependent upon AKB-9778, any such setback in our pursuit of regulatory approval would have a material adverse effect on our business and prospects.

In addition, similar reasons may cause the EMA or other regulatory authorities to delay, limit or deny approval of our product candidates outside the United States.

Any of these factors, many of which are beyond our control, could jeopardize our ability to obtain regulatory approval for and successfully market our product candidates.

Because our business is substantially dependent upon our product candidates, 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 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.

2 unchanged sentences

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

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

We have not obtained agreement with the FDA on the design of our planned development programs for AKB-9778 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 AKB-9778 development program could increase materially and the potential market introduction of AKB-9778 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 AKB-9778 for open angle glaucoma and ocular hypertension with the FDA, EMA or other regulatory authorities.

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 AKB-9778, any such delay or increase in costs would have an adverse effect on our business.

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

2 unchanged sentences

Our competitors may have ongoing clinical trials for product candidates that could be competitive with our product candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates.

As a result, the timeline for recruiting patients, conducting trials and obtaining regulatory approval of potential products may be delayed.

These delays could result in increased costs, delays in advancing our development of AKB-9778 or termination of the clinical trials altogether.

We may not be able to identify, recruit and enroll a sufficient number of patients, or those with required or desired characteristics to achieve diversity in a trial, to complete our clinical trials in a timely manner.

6 unchanged sentences

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 advantages of AKB-9778 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;

1 unchanged sentence

ability to monitor patients adequately during and after treatment;

We may not be able to initiate or continue clinical trials if we cannot enroll a sufficient number of eligible patients to participate in the clinical trials required by regulatory agencies.

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.

Business interruptions resulting from the COVID-19 coronavirus or similar public health crises could cause a disruption of the development of our product candidates and adversely impact our business.

Public health crises such as pandemics or similar outbreaks could adversely impact our business.

In December 2019, a novel strain of coronavirus, or COVID-19, was reported to have surfaced in Wuhan, China and has reached multiple other countries, resulting in government-imposed quarantines, travel restrictions and other public health safety measures in numerous countries.

The extent to which the coronavirus impacts our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others.

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 planning to conduct a Phase 2 clinical trial for AKB-9778, and our trial sites may be located in geographies that may be affected by the coronavirus.

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

These and other factors arising from the coronavirus could worsen in countries that are already afflicted with the virus or could continue to spread to additional countries, each of which could further adversely impact our ability to conduct clinical trials and our business generally.

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.

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 AKB-9778.

factors we may not be able to control, such as current or potential pandemics that may limit patients, principal investigators or staff or clinical site availability ( e.g., the COVID-19 pandemic).

If we cannot replicate the positive results from preclinical studies or earlier stage clinical trials in subsequent clinical trials, we may be unable to successfully develop, obtain regulatory approval for and commercialize our product candidates.

2 unchanged sentences

Success in preclinical studies may not be predictive of similar results in humans during clinical trials, and successful results from early or small clinical trials may not be replicated in later and larger clinical trials.

For example, we observed encouraging preclinical and clinical results for AKB-9778 in non-proliferative diabetic retinopathy, but this product candidate did not meet the study endpoints in our TIME-2b clinical trial.

There can be no assurance that the results of our planned and future clinical trials will produce positive results.

For example, w hile our Phase 2 trial met the primary efficacy endpoint at Day 28 with the BID group, the IOP decrease was not at a level deemed sufficient to move to Phase 3 development .

There can be no assurance that the results of any clinical trials that we may undertake in the future will produce positive results.

In addition, later stage clinical trials are expected to enroll a larger number of subjects and will treat subjects for longer periods than earlier stage trials, which will result in a greater likelihood that adverse events may be observed.

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 AKB-9778 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 AKB-9778.

We may experience delays in the planned clinical development program for AKB-9778, 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.

Interim, “topline,” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publicly disclose preliminary or topline data from our preclinical studies and clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial.

We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data.

As a result, the topline or preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated.

Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published.

As a result, topline data should be viewed with caution until the final data are available.

From time to time, we may also disclose interim data from our clinical trials.

Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available or as patients from our clinical trials continue other treatments for their disease.

Adverse differences between preliminary or interim data and final data could significantly harm our business prospects.

Further, disclosure of interim data by us or by our competitors could result in volatility in the price of our common stock after this offering.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general.

In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure.

If the interim, topline, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition.

We may experience delays in the conduct of any clinical trials we may undertake in the future , and we do not know whether such clinical trials will begin on time, need to be redesigned, enroll patients on time or be completed on schedule, if at all.

Clinical trials can be delayed or aborted for a variety of reasons, including delay or failure to:

7 unchanged sentences

manufacture sufficient quantities of our product candidate for use in clinical trials.

In addition, disruptions caused by the COVID-19 pandemic may increase the likelihood that we encounter such difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing clinical trials.

We could encounter delays if a clinical trial is suspended or terminated by us, by the relevant IRBs at the sites at which such trials are being conducted, by the Data Safety Monitoring Board (“DSMB”) for such trial or by the FDA or other regulatory authorities.

Such authorities may impose such a suspension or termination, including a clinical hold, due to a number of factors, including failure to conduct the clinical trial in accordance with regulator y requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities, unforeseen safety issues or adverse side effects including those experienced by other product candidates in the same class as our product candidates, changes in laws or regulations, or lack of adequate funding to continue the clinical trial.

Such authorities may impose such a suspension or termination, including a clinical hold, due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities, unforeseen safety issues or adverse side effects including those experienced by other product candidates in the same class as our product candidates, changes in laws or regulations, or lack of adequate funding to continue the clinical trial.

Any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues.

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

Risks Related to Regulatory Review and Approval of Product Candidates

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.

13 unchanged sentences

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 1b clinical trial for AKB-9778.

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

third parties on whom we rely may terminate their engagements with us at any time, and having to enter into al ternative 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.

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 AKB-9778 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.

Any of these third parties may 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 planned Phase 3 development program.

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 agreements 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 AKB-9778 is approved and marketed, a failure to satisfy patient demand.

Reliance on thir d 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 product 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 produc t 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 inclu de:

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 AKB-9778 ourselves in the United States and intend to seek one or more strategic collaborators to commercialize AKB-9778 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 development and milestone payments contingent upon the achievement of specified milestones.

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 commercialization of any such product candidate, and we may need to seek

additional fi nancing, 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 strategic 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 jurisdictions.

We may conduct our clinical trials for our product candidates in trial sites outside of the United States, including Japan, the United Kingdom 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, the United Kingdom and Japan.