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Item 1A. Risk Factors

2021-05-17 compared with 2020-11-10 · 320 added, 323 removed, 761 unchanged (46% of the section changed)

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

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

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

Please see page 17 of this Quarterly Report on Form 10-Q for a discussion of some of the forward-looking statements that are qualified by these risk factors.

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

Risks Related to our Merger with Aadi Bioscience, Inc.

Failure to complete, or delays in completing, the potential merger with Aadi announced on May 17, 2021 could materially and adversely affect our results of operations, business, financial results and/or stock price.

On May 16, 2021, we entered into an agreement with Aadi and our wholly-owned merger subsidiary (“Merger Sub”) pursuant to which, if all of the conditions to closing are satisfied or waived, Aadi will merge with and into Merger Sub, with Aadi continuing as the surviving company and a wholly-owned subsidiary of our company (the “Merger”).

Consummation of the Merger is subject to certain closing conditions, a number of which are not within our control.

Any failure to satisfy these required conditions to closing may prevent, delay or otherwise materially adversely affect the completion of the transaction.

We cannot predict with certainty whether or when any of the required closing conditions will be satisfied or if another uncertainty may arise and cannot assure you that we will be able to successfully consummate the proposed merger as currently contemplated under the Merger Agreement or at all.

Our efforts to complete the Merger could cause substantial disruptions in, and create uncertainty surrounding, our business, which may materially adversely affect our results of operation and our business.

Uncertainty as to whether the Merger will be completed may affect our ability to recruit prospective employees or to retain and motivate existing employees.

Employee retention may be particularly challenging while the transaction is pending because employees may experience uncertainty about their roles following the transaction.

Uncertainty as to our future could adversely affect our business and our relationship with collaborators, suppliers, vendors, regulators and other business partners.

For example, vendors, collaborators and other counterparties may defer decisions about working with us or seek to change existing business relationships with us.

Changes to, or termination of, existing business relationships could adversely affect our results of operations and financial condition, as well as the market price of our common stock.

The adverse effects of the pendency of the transaction could be exacerbated by any delays in completion of the transaction or termination of the Merger Agreement.

Risks related to the failure of the proposed merger to be consummated include, but are not limited to, the following:

we would not realize any or all of the potential benefits of the Merger, including any synergies that could result from combining our financial and proprietary resources with those of Aadi, which could have a negative effect on our stock price;

under some circumstances, we may be required to pay a termination fee to Aadi of $2 million and/or pay Aadi’s out-of-pocket fees and expense of up to $750,000;

we will remain liable for significant transaction costs, including legal, accounting, financial advisory and other costs relating to the Merger regardless of whether the Merger is consummated;

the trading price of our common stock may decline to the extent that the current market price for our stock reflects a market assumption that the Merger will be completed;

the attention of our management and employees may have been diverted to the Merger rather than to our own operations and the pursuit of other opportunities that could have been beneficial to us;

we could be subject to litigation related to any failure to complete the Merger;

the potential loss of key personnel during the pendency of the Merger as employees and other service providers may experience uncertainty about their future roles with us following completion of the Merger;

under the Merger Agreement, we are subject to certain restrictions on the conduct of our business prior to completing the Merger, which restrictions could adversely affect our ability to conduct our business as we otherwise would have done if we were not subject to these restrictions.

The occurrence of any of these events individually or in combination could materially and adversely affect our results of operations, business, and our stock price.

We cannot be sure if or when the Merger will be completed.

The consummation of the Merger is subject to the satisfaction or waiver of various conditions, including the authorization of the Merger and/or related transactions by our shareholders and Aadi’s shareholders.

In addition, in connection with the Merger Agreement, we have entered into subscription agreements to raise $155.0 million in a Private Investment in Public Equity (“PIPE”) financing in shares of common stock and/or pre-funded warrants to purchase common stock.

The financing is expected to be consummated concurrently with the closing of the merger, subject to customary closing conditions, and is contingent on the merger, and vice versa.

We cannot guarantee that the closing conditions set forth in the Merger Agreement will be satisfied.

If we are unable to satisfy the closing conditions in Aadi’s favor or if other mutual closing conditions are not satisfied, Aadi will not be obligated to complete the Merger.

Under certain circumstances, we would be required to pay Aadi a termination fee of $2.0 million .

In addition, in connection with certain terminations of the Merger Agreement, Aerpio may be required to pay Aadi’s out-of-pocket fees and expenses up to $750,000, which shall be credited against any termination fee which becomes payable thereafter.

If the Merger is not completed, our board of directors, in discharging its fiduciary obligations to our shareholders, will evaluate other strategic alternatives or financing options that may be available, which alternatives may not be as favorable to our shareholders as the Merger.

Any future sale or merger, financing or other transaction may be subject to further shareholder approval.

We may also be unable to find, evaluate or complete other strategic alternatives, which may have a materially adverse effect our business.

Uncertainty as to whether the Merger will be completed may affect our ability to recruit prospective employees or to retain and motivate existing employees.

Employee retention may be particularly challenging while the transaction is pending because employees may experience uncertainty about their roles following the transaction.

A substantial amount of our management’s and employees’ attention is being directed toward the completion of the transaction and thus is being diverted from our day-to-day operations.

Uncertainty as to our future could adversely affect our business and our relationship with collaborators, suppliers, vendors, regulators and other business partners.

For example, vendors, collaborators and other counterparties may defer decisions concerning working with us, or seek to change existing business relationships with us.

Changes to, or termination of, existing business relationships could adversely affect our results of operations and financial condition, as well as the market price of our common stock.

The adverse effects of the pendency of the transaction could be exacerbated by any delays in completion of the transaction or termination of the Merger Agreement.

Until the Merger is completed, the Merger Agreement restricts Aadi and us from taking specified actions without the consent of the other party, and, in regards to us, requires us to operate in the ordinary course of business consistent with past practice.

These restrictions may prevent Aadi and us from making appropriate changes to our respective businesses or pursuing attractive business opportunities that may arise prior to the completion of the Merger.

Because the Merger Agreement provides for a fixed exchange ratio for the number of shares of our common stock that will be issued for each outstanding share of Aadi’s share capital, we may face risks as a result of changes in our stock price during the pendency of the merger.

The Merger Agreement provides for a fixed exchange ratio for the number of shares of our common stock that will be issued for each outstanding share of Aadi’s share capital in the Merger.

If the public trading value of shares of our common stock changes over the period of time required to satisfy the Merger’s closing conditions, the consideration to be issued to Aadi’s shareholders at the time of the Merger may be different from the public trading value of shares of our common stock when we entered into the Merger Agreement.

The Merger Agreement contains provisions that limits our ability to pursue alternatives to the Merger, could discourage a potential competing acquiror of us from making an alternative transaction proposal and, in specified circumstances, could require us to pay a termination fee to Aadi.

The Merger Agreement provides that we shall not, and requires us to refrain from permitting our representatives to, among other things, solicit, participate in negotiations with respect to or approve or recommend any third party proposal for an alternative transaction, subject to exceptions set forth in the Merger Agreement relating to the receipt of certain unsolicited proposals.

Further, while our board of directors is permitted to make a recommendation change to our stockholders with respect to the Merger under certain circumstances, unless Aadi terminates the Merger Agreement, we nonetheless will be required to submit the proposals to a

stockholder vote at a special meeting.

This requirement, which is often called a “force the vote” provision, means that we do not have the right before the stockholder vote to terminate the Merger Agreement to accept a superior proposal.

If the Merger Agreement is terminated, in certain circumstances, we may be required to pay Aadi a termination fee of $2.0 million.

These provisions could discourage a potential third-party acquiror or merger partner that might have an interest in acquiring all or a significant portion of us or pursuing an alternative transaction from considering or proposing such a transaction, even if it were prepared to pay consideration with a higher per share cash or market value than the consideration in the Merger, or might result in a potential third-party acquiror or merger partner proposing to pay a lower price to our stockholders than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances.

If the Merger Agreement is terminated and we determine to seek another business combination, we may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the Merger.

Lawsuits may be filed against us and the members of our board of directors arising out of the proposed merger, which may delay or prevent the proposed merger.

Putative stockholder complaints, including stockholder class action complaints, and other complaints may be filed against us, our board of directors, Aadi, Aadi’s board of directors and others in connection with the transactions contemplated by the Merger Agreement.

The outcome of litigation is uncertain, and we may not be successful in defending against any such future claims.

Lawsuits that may be filed against us, our board of directors, Aadi, or Aadi’s board of directors could delay or prevent the Merger, divert the attention of our management and employees from our day-to-day business and otherwise adversely affect us financially.

Our stockholders may not receive any payment on the CVRs and the CVRs may otherwise expire valueless.

The Merger Agreement contemplates that, at or prior to the Effective Time, we will execute and deliver a contingent value rights agreement (the “CVR Agreement”), pursuant to which each holder of our common stock as of immediately prior to the Effective Time shall be entitled to one contractual contingent value right (“CVR”) issued by our company, subject to and in accordance with the terms and conditions of the CVR Agreement, for each share of our common stock held by such holder.

Each CVR will entitle the holder of the CVR to receive payments upon certain sale or disposition transactions with respect to our legacy assets.

The right of our stockholders to derive any value from the CVRs will be contingent upon the completion of one or more of such transactions as contemplated by the CVR Agreement.

As a result, there can be no assurance that holders of CVRs will derive any value from such rights.

We are substantially dependent on our remaining employees to facilitate the consummation of the merger.

As of May 16, 2021, we had only five full-time employees.

Our ability to successfully complete the Merger depends in large part on our ability to retain certain remaining personnel.

Despite our efforts to retain these employees, one or more may terminate their employment with us on short notice.

The loss of the services of certain employees could potentially harm our ability to consummate the Merger, to run our day-to-day business operations, as well as to fulfill our reporting obligations as a public company.

If we do not successfully consummate a strategic transaction with Aadi or otherwise, 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 our agreement with Aadi will result in a successfully consummated transaction.

There is no guarantee that we will achieve any such alternatives.

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 Our Evaluation of Strategic Alternatives for our Legacy Assets

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

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

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

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

On May 16, 2021, we entered into a definitive agreement for a merger transaction with Aadi Bioscience, Inc.

as described below.

However, we are continuing to explore strategic options for our legacy assets.

There can be no assurance that this exploration of strategic alternatives will result in us entering or completing any transaction with respect to those assets or that any resulting plans or transactions will yield additional value for shareholders .

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

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

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

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

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

If we do not complete the merger transaction with Aadi Bioscience, Inc., we will continue to face risks related to our legacy business as described below.

There can be no assurance that we will succeed in such activities.

Risks Related to the COVID-19 Pandemic

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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.

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 and mass vaccination campaigns is not yet known.

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

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

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

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

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

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

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

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.

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

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

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

Risks Related to Clinical Development

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

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

We rely on our lead product candidate, razuprotafib, 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 topline results of the Phase 2b clinical trial for razuprotafib in the treatment of non-proliferative diabetic retinopathy.

While we believed razuprotafib had the potential to slow down or possibly reverse retinal vascular changes caused by diabetes, the subcutaneous administration of razuprotafib 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, razuprotafib, 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 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 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, razuprotafib plus prostaglandin produced a statistically significant decrease in IOP versus prostaglandin alone on Day 7.

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

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

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.

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

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

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

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, t he results of our company-sponsored trials or raise concerns regarding our product candidates, the FDA or a foreign regulatory authority may question the results of the company-sponsored trial, or subject such results to greater scrutiny than it otherwise would.

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

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 3 1 patients were enrolled based on challenges recruiting and monitoring patients in the current pandemic environment.

Based on topline data in the RESCUE trial , there were no apparent safety signals associated with dosing COVID-19 patients with razuprotafib.

There was a mechanism-based, dose-dependent reduction of blood pressure which was not associated with other adverse events.

There was an apparent dose-dependent decrease in Angiopoietin 2 (“Ang2”) that would be consistent with the Tie2 activation mechanism.

The efficacy of razuprotafib could not be fully assessed due to the limited number of patients treated in the drug and standard of care arms.

At the 28 day study endpoint, there were an equal number of deaths in each group (one per group).

Further analysis of the full data set is ongoing .

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

Razuprotafib will require substantial additional clinical development, testing, 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.

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 evaluating our options for all of our assets as part of our strategic review process.

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

As part of our strategic review process, we may determine to out-license, partner or otherwise dispose of our assets, and we may never derive value from such assets.

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.

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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 razuprotafib.

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

As a condition to submitting an NDA to the FDA for razuprotafib, we must complete our ongoing Phase 2 clinical trial, conduct and complete further Phase 3 clinical trials, and any additional nonclinical studies or clinical trials required by the FDA.

To date, we have only completed a Phase 1b clinical trial of razuprotafib in healthy volunteers and in patients with open angle glaucoma or ocular hypertension on standard of care prostaglandin therapy.

Razuprotafib may not be successful in clinical trials or receive regulatory approval.

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

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.

In the event that any of our assets are partnered for development, our collaborators would face these and other risks described in these risk factors in the development, approval and commercialization of our product candidates.

As a result, we may never derive the intended benefits of such collaborations.

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.

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government, including the FDA.

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

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

we may not be able to demonstrate that razuprotafib is safe and effective in treating patients with open angle glaucoma and ocular hypertension, or any other indications that may be pursued for the product candidate, 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 razuprotafib;

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

the FDA may require that we conduct additional clinical trials;

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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 razuprotafib 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 razuprotafib.

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

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.

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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 razuprotafib 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.

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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.

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

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

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

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.

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

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

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:

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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 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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

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.

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:

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Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.

Separately, in response to the COVID-19 pandemic, on March 10, 2020 the FDA announced its intention to postpone most inspections of foreign manufacturing facilities while local, national and international conditions warrant.

On March 18, 2020, the FDA announced its intention to temporarily postpone routine surveillance inspections of domestic manufacturing facilities and provided guidance regarding the conduct of clinical trials which the FDA continues to update.

As of June 23, 2020, the FDA noted it was conducting mission critical domestic and foreign inspections to ensure compliance of manufacturing facilities with FDA quality standards.

On July 10, 2020, the FDA announced its goal of restarting domestic on-site inspections during the week of July 20, 2020, but such activities will depend on data about the virus’ trajectory in a given state and locality and the rules and guidelines that are put in place by state and local governments.

The FDA has developed a rating system to assist in determining when and where it is safest to conduct prioritized domestic inspections.

Should FDA determine that an inspection is necessary for approval and an inspection cannot be completed during the review cycle due to restrictions on travel, FDA has stated that it generally intends to issue a complete response letter.

Further, if there is inadequate information to make a determination on the acceptability of a facility, FDA may defer action on the application until an inspection can be completed.

Since March 2020 when foreign and domestic inspections were largely placed on hold, the FDA has been working to resume routine surveillance, bioresearch monitoring and pre-approval inspections on a prioritized basis.

The FDA has developed a rating system to assist in determining when and where it is safest to conduct prioritized domestic inspections and resumed inspections in China and India in early 2021.

In April 2021, the FDA issued guidance for industry formally announcing plans to employ remote interactive evaluations, using risk management methods, to meet user fee commitments and goal dates and in May 2021 announced plans to continue progress toward resuming standard operational levels.

Should the FDA determine that an inspection is necessary for approval and an inspection cannot be completed during the review cycle due to restrictions on travel, and the FDA does not determine a remote interactive evaluation to be appropriate, the FDA has stated that it generally intends to issue a complete response letter.

Further, if there is inadequate information to make a determination on the acceptability of a facility, the FDA may defer action on the application until an inspection can be completed.

In 2020, several companies announced receipt of complete response letters due to the FDA’s inability to complete required inspections for their applications.

Regulatory authorities outside the U.S.

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In addition, our existing patents and any future patents we obtain may not be sufficiently broad to prevent others from using our technology or from developing competing products and technologies.

Composition-of-matter patents on the active pharmaceutical ingredient are generally considered to be the strongest form of intellectual property protection for pharmaceutical products, as such patents provide protection without regard to any method of use.

Composition-of-matter patents on the active pharmaceutical ingredient are generally considered to be the strongest form of intellectual property protection for

pharmaceutical products, as such patents provide protection without regard to any method of use.

Method-of-use patents protect the use of a product for the specified method.

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In addition to the protection afforded by patents, we seek to rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable, processes for which patents are difficult to enforce and any other elements of our drug discovery and development processes that involve proprietary know-how, information or technology that is not covered by patents.

Although we require all of our employees to assign their inventions to us, and require all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how , information or technology to enter into confidentiality agreements, we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed, willfully or unintentionally, or that competitors will not otherwise gai n access to our trade secrets or independently develop substantially equivalent information and techniques.

Trade secrets are difficult to protect, and we have limited control over the protection of trade secrets used by our licensors, collaborators, and s uppliers.

Although we require all of our employees to assign their inventions to us, and require all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information or technology to enter into confidentiality agreements, we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed, willfully or unintentionally, or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques.

Trade secrets are difficult to protect, and we have limited control over the protection of trade secrets used by our licensors, collaborators, and suppliers.

Furthermore, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States.

As a result, we may encounter significant problems in protecting and defending our intell ectual property both in the United States and abroad.

If we are unable to prevent unauthorized material disclosure of our intellectual property to third parties, we will not be able to establish or maintain a competitive advantage in our market, which coul d materially adversely affect our business, operating results and financial condition.

As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad.

If we are unable to prevent unauthorized material disclosure of our intellectual property to third parties, we will not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, operating results and financial condition.

We currently have a non-exclusive license to one U.S.

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We may have no control or input over whether, and in what manner, our licensor may enforce or defend the patent against a third-party.

The licensor may enforce or defend the patent less vigorously than if we had enforced or defended the patent ourselves.

The licensor may enforce or defend the patent less vigorously than if we had

enforced or defended the patent ourselves.

Further, the licensor may not necessarily seek enforcement in scenarios in which we would feel that enforcement was in our best interests.

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As a consequence, issued patents may be found to contain invalid claims according to the newly revised eligibility and validity standards.

So me of our patents may be subject to challenge and subsequent invalidation or significant narrowing of claim scope in proceedings before the USPTO, or during litigation, under the revised criteria which could also make it more difficult to obtain patents.

Some of our patents may be subject to challenge and subsequent invalidation or significant narrowing of claim scope in proceedings before the USPTO, or during litigation, under the revised criteria which could also make it more difficult to obtain patents.

We may not be able to detect infringement against our patents, as the case may be, which may be especially difficult for formulation patents.

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These conflicts of interest can lead to litigation or impact the ability of the third party to fulfill their obligations to us.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee pay ment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent.

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There can be no assurance they do not, however, and competitors or other parties may assert that we infringe their proprietary rights in any event.

Third parties may hold or obtain patents or other intellectual property rights and allege in the future that the use of our product candidates infringes these patents or intellectual property rights, or that we are employing their proprietary technology without authorizati on.

law, a party may be able to patent a discovery of a new way to use a previously known compound, even if such compound itself is patented, provided the newly discovered use is novel and nonobvious.

Such a method-of-use patent, however, if val id, only protects the use of a claimed compound for the specified methods claimed in the patent.

Such a method-of-use patent, however, if valid, only protects the use of a claimed compound for the specified methods claimed in the patent.

This type of patent does not prevent persons from using the compound for any previously known use of the compound.

Further, this type of patent does not preven t persons from making and marketing the compound for an indication that is outside the scope of the patented method.

Further, this type of patent does not prevent persons from making and marketing the compound for an indication that is outside the scope of the patented method.

There may be patents of third parties of which we are currently unaware with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our drug candidates.

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If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formed during the manufacturing process or any final product itself, then the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire or they are finally determined to be held invalid or unenforceable.

Similarly, if any third-party patent were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or our intended methods of use, then the holders of any such patent may be able to block or impair our ability to develop and commercialize the applicable product candidate unless we obtained a license or until such patent expires or is finally determined to be held invalid or unenforceable.

such patent may be able to block or impair our ability to develop and commercialize the applicable product candidate unless we obtained a license or until such patent expires or is finally determined to be held invalid or unenforceable.

We may also elect to enter into a license in order to settle litigation or in order to resolve disputes prior to litigation.

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

In such a case, we could ultimately be

forced to cease use of such marks.

In such a case, we could ultimately be forced to cease use of such marks.

In any intellectual property litigation, even if we are successful, any award of monetary damages or other remedy we receive may not be commercially valuable.

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

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

Risks Related to Our Business and Industry

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If we fail to attract and keep senior management and key scientific personnel, we may be unable to successfully develop our product candidates, conduct our clinical trials and commercialize our products.

We are highly dependent on members of our senior management, including Joseph Gardner, our President and Founder and former Chief Executive Officer, Kevin G.

Peters, our Chief Scientific Officer and acting Chief Medical Officer, and Regina Marek, our Vice President of Finance.

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

We are highly dependent on members of our senior management and loss of the services of any of these persons could impede the achievement of our objectives, including with respect to our efforts for the exploration of strategic alternatives.

Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel will also be critical to our success.

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We may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the intense competition among numerous biopharmaceutical companies for similar personnel.

In addition, 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.

In addition, in

January 2021 , 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 seven employees, representing approximately 58 % of our workforce.

As a result, while we have undertaken efforts to retain our current employees, we may experience challenges in doing so.

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We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of these third parties or our employees’ former employers.

We may also be subject to claims that former

employees, collaborators or other third parties have an ownership interest in our patents or other intellectual property.

We may also be subject to claims that former employees, collaborators or other third parties have an ownership interest in our patents or other intellectual property.

We may be subject to ownership disputes in the future arising, for example, from conflicting obligations of consultants or others who are involved in developing our drug candidates.

Litigati on may be necessary to defend against these claims.

If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual p roperty.

Litigation may be necessary to defend against these claims.

Such an outcome could have a material adverse effect on our business.

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Risks Related to Our Business Operations and Growth

We may encounter difficulties in managing our growth and expanding our operations successfully.

As we seek to advance our product candidates through clinical trials and commercialization, we will need to expand our development, regulatory, manufacturing, marketing and sales capabilities or contract with third parties to provide these capabilities for us.

As our operations expand, we expect that we will need to manage additional relationships with various strategic collaborators, suppliers and other third parties.

Future growth will impose significant added responsibilities on members of management.

Our future financial performance and our ability to commercialize razuprotafib, if approved, and any other product candidates and to compete effectively will depend, in part, on our ability to manage any future growth effectively.

To that end, we must be able to manage our development efforts and clinical trials effectively and hire, train and integrate additional management, administrative and, if necessary, sales and marketing personnel.

We may not be able to accomplish these tasks, and our failure to accomplish any of them could prevent us from successfully growing our Company.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.

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We will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could ha rm our business.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes.

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Risks Related to Our Reliance on Third Parties

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Any of these third parties 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 development programs.

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 razuprotafib is approved and marketed, a failure to satisfy patient demand.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Furthermore, changes in manufacturers often involve changes in manufacturing procedures and processes, which could require that we conduct bridging studies between our prior clinical supply used in our clinical trials and that of any new manufacturer.

We may be unsuccessful in demonstrating the comparability of clinical supplies which could require the conduct of additional clinical trials.

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.

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

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

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

We are currently exploring our development options for our product candidates, and such options may include strategic collaborations and licenses for the future development of our assets.

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

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

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

On May 12, 2020, we entered into

that certain Amendment No.

1 to the Gossamer License Agreement (“Amendment No.

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

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 manufact urers 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 d rug product on a commercial scale, replacement of a manufacturer may be expensive and time-consuming and may cause interruptions in the production of our drug product.

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

These problems may include:

difficulties with production costs, scale-up and yields;

availability of raw materials and supplies;

quality control and assurance;

shortages of qualified personnel;

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

lack of capital funding.

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

Risks Related to Our Financial Position and Need for Additional Capital

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

For the three months ended September 30, 2020 and 2019, we incurred net and comprehensive loss of $5.0 million and $4.6 million, respectively.

As of September 30, 2020, we had an accumulated deficit of $141.8 million.

For the three months ended March 31, 2021 and 2020, we incurred net and comprehensive loss of $4.4 million and $3.9 million, respectively.

As of March 31, 2021, we had an accumulated deficit of $151.0 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.

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

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

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

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

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

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

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

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

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

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

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

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

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

seek to discover and develop additional product candidates;

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

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

maintain, protect and expand our intellectual property portfolio;

attract and retain skilled personnel;

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

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 plans for development of our product candidates and our ability to obtain funding through equity or debt financings, strategic collaborations or grants to fund such development.

We expect to continue to incur significant expenses and operating losses for the foreseeable future, including to sustain our operations while we evaluate our development options for our product candidates, seek strategic alternatives and to operate as a public reporting company.

Because of the numerous risks and uncertainties associated with pharmaceutical 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.

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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.

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 seven employees, representing approximately 58% of our workforce.

As a result of this realignment plan, we incurred a 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.

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.

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

Ri sks Related to Future Financial Condition

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

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

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

This strategic alternative process is ongoing and we continue to engage 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.

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

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 September 30, 2020, our cash and cash equivalents were $47.3 million.

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

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

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

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

In addition, other unanticipated costs may arise.

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

Our future capital requirements depend on many factors, including:

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

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

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

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

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

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

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

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

our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financia l 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.

Risks Related to Future Financial Condition

We do not have any committed sources of outside capital.

A failure to obtain necessary capital when needed to sustain our business could force us to suspend our operations.

As of March 31, 2021, our cash and cash equivalents were $39.0 million.

We are currently evaluating our development options for our product candidates.

Any efforts for continued program development will be time-consuming and expensive.

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 through the fourth quarter of 2022.

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

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

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

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

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

If adequate funds are not available to us on a timely basis, we may be required to suspend our operations.

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.

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.

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

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

If we are unable to raise additional funds through equity or debt financing when needed, we may be required to suspend our operations .

Risks Related to Commercialization

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Our future commercial success depends upon attaining significant market acceptance of our product candidates, if approved, among physicians, patients, third-party payors and others in the medical community.

Even if we obtain marketing approval for razuprotafib or any other product candidates that we may develop or acquire in the future, these product candidates may not gain market acceptance among physicians, third-party payors, patients and others in the medical community.

Even if we obtain marketing approval for one or more of our product candidates, these product candidates may not gain market acceptance among physicians, third-party payors, patients and others in the medical community.

In addition, market acceptance of any approved products depends on a number of other factors, including:

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the restrictions on the use of our products together with other medications, if any.

For example, the current established treatments for glaucoma are predominantly eye drop drugs such as prostaglandins (e.g., latanoprost), beta blockers (e.g., timolol), carbonic anhydrase inhibitors (e.g., dorozolamide) and alpha agonists (e.g., brimonidin e), many of which are generic, and are used as single agent therapies or combinations of a prostaglandin along with another agent.

Recently there have been new agents approved including netarsidil (Rhopress TM, and in combination with latanoprost, Rhoclat an TM) and l atanoprostene bunod (Vyzulta TM) In addition, razuprotafib is being explored for its potential to treat ARDS associated with COVID-19, an indication in which many companies have devoted substantial time and resources and for which a large numbe r of agents are in various stages of development, such as remdesivir and dexamethasone.

If one or more of these competing agents are approved for commercial sale and receive market acceptance as the standard of care in this indication, physicians may be re sistant to prescribing razuprotafib even if it receives regulatory approval.

Unless we demonstrate that razuprotafib has single agent efficacy as effective as or more effective than current single-agent standard of care, or as effective or more effective in combination with a prostaglandin such as latanoprost as other combination products, prescribers may be resistant to prescribing it for glaucoma.

Market acceptance is critical to our ability to generate significant revenue.

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In many cases, the products that we commercialize will compete with existing, market-leading products.

If razuprotafib is approved and launched commercially, competing drugs may include generic agents that comprise current standard of care (e.g., latanoprost, timolol, and others) as well as newly approved agents such as Rhopressa, Rhoclatan (Aerie Pharmaceuticals) and Vyzulta (Bausch + Lomb), and others that are in development for the treatment of glaucoma.

In addition, razuprotafib is being explored for its potential to treat ARDS associated with COVID-19, an indication in which many companies have devoted substantial time and resources and for which a large number of agents are in various stages of development.

Many of our potential competitors have significantly greater financial, manufacturing, marketing, drug development, technical and human resources than we do.

Large pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining regulatory approvals, recruiting patients and in manufacturing pharmaceutical products.

Large and established companies such as Aerie Pharmaceuticals, Bausch + Lomb, Santen, Novartis, ONO, Takeda, Allergan and others compete in the market for products for the treatment of glaucoma.

Companies developing product candidates for the treatment or prevention of ARDS as it relates to COVID-19 include, but not limited to the following, Lilly, Regeneron, Takeda, Amgen, Abbvie, Edesa Biotech, Implicit Bioscience, Athersys and Biomarck Pharmaceuticals.

In particular, these companies have greater experience and expertise in securing government contracts and grants to support their research and development efforts, conducting testing and clinical trials, obtaining regulatory approvals to market products, manufacturing such products on a broad scale and marketing approved products.

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If we are not able to compete effectively against potential competitors, our business will not grow and our financial condition and operations will suffer.

If we are unable to establish sales, marketing and distribution capabiliti es or to enter into agreements with third parties to market and sell our product candidates, we may not be successful in commercializing our product candidates if and when they are approved.

If we are unable to establish sales, marketing and distribution capabilities or to enter into agreements with third parties to market and sell our product candidates, we may not be successful in commercializing our product candidates if and when they are approved.

We do not have a sales or marketing infrastructure and have no experience in the sale, marketing or distribution of pharmaceutical products.

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The most common drug-related adverse events to date in the clinical trials evaluating the safety and tolerability of subcutaneous razuprotafib have been dizziness and asymptomatic decreases in blood pressure, and these adverse events may occur in future development by this route of administration.

The most common adverse event seen in the Phase 1b clinical trial evaluating the safety and tolerability of topical ocular razuprotafib was mild conjunctival hyperemia.

The most common adverse event seen in the Phase 1b and Phase 2 clinical trials evaluating the safety and tolerability of topical ocular razuprotafib was mild conjunctival hyperemia.

Our understanding of the relationship between razuprotafib and these events, as well as our understanding of adverse events in future clinical trials of other product candidates, may change as we gather more information, and additional unexpected adverse events may be observed.

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our reputation may suffer.

With respect to the potential use of razuprotafib for the treatment of ARDS associated with COVID-19, we have not conducted clinical development of this product candidate for such indication.

With respect to the potential use of razuprotafib for the treatment of ARDS associated with COVID-19, clinical development remains in the early stages.

As a result, while we believe razuprotafib may have a favorable tolerability profile in this patient population, there can be no assurance that we will not observe the incidence of adverse events or serious adverse events upon further development of razuprotafib.

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

In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures.

Political, economic and regulatory developments may further

complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained.

Reference pricing used by various European Union member states and parallel distribution, or arbitrage between low-priced and high -priced member states, can further reduce prices.

In some countries, we may be required to conduct a clinical trial or other studies that compare the cost-effectiveness of our product candidates to other available products in order to obtain or maintain re imbursement or pricing approval.

In addition, there can be considerable pressure by governments and other stakeholders on prices and

reimbursement levels, including as part of cost containment measures.

Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained.

Reference pricing used by various European Union M ember S tates and parallel distribution, or arbitrage between low-priced and high-priced M ember S tates, can further reduce prices.

Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries.

If reimbursement of our products is una vailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be adversely affected.

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

The impact of recent healthcare reform and other changes in the healthcare industry and in healthcare spending is currently unknown and may adversely affect our business model.

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This includes aggregate reductions of Medicare payments to providers of up to 2% per fiscal year, which went into effect on April 1, 2013.

Pursuant to the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, these reductions are suspended from May 1, 2020 through December 31, 2020 due to the COVID-19 pandemic.

As the legislation currently stands, the reductions will go back into effect January 2021 and will remain in effect through 2030 unless additional Congressional action is taken.

It is likely that federal and state legislatures within the United States and foreign governments will continue to consider changes to existing healthcare legislation.

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

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

One such Executive Order directed federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from or delay the implementation of any provision of the ACA that would impose a fiscal 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.

The second Executive Order terminates the cost-sharing subsidies that reimburse insurers under the ACA.

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

The loss of the cost share reduction payments is expected to increase premiums on certain policies issued by qualified health plans under the ACA.

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

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

This decision was appealed to the U.S.

Supreme Court, which on April 27, 2020, reversed the U.S.

Court of Appeals for the Federal Circuit’s decision and remanded the case to the U.S.

Court of Federal Claims, concluding the government has an obligation to pay these risk corridor payments under the relevant formula.

It is not clear what effect this result will have on our business, but we will continue to monitor any developments.

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

In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduc ed Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

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 “indiv idual 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 repealed, 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, and remanded the case to the lower court to reconsider its earlier invalidation of the full ACA.

In March 2020, the U.S.

Supreme Court agreed to hear this case, with arguments likely to take place later this year.

Pending review, the ACA remains in effect, but it is unclear at this time what effect the latest ruling will have on the status of the ACA.

Pursuant to the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, and the 2020 Omnibus Bill, these reductions are suspended from May 1, 2020 through December 31, 2021 due to the COVID-19 pandemic.

As the legislation currently stands, the reductions will go back into effect April 2021 and will remain in effect through 2030 unless additional Congressional action is taken.

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 former Trump Administration had 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.

The United States Supreme Court is expected to rule on a legal challenge to the constitutionality of the ACA in early 2021.

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.

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

We w ill continue to evaluate the effect that the ACA and its possible repeal and replacement has on our business.

Further, the Trump administration’s budget for fiscal year 2021 includes a $135 billion allowance (over a period of time) to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs.

Additionally, in 2018, 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, the Centers for Medicare & Medicaid Services (“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.

We will continue to evaluate the effect that the ACA and its possible repeal and replacement has on our business.

Moreover, the Drug Supply Chain Security Act imposed new obligations on manufacturers of pharmaceutical products related to product tracking and tracing.

Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products.

We are not sure whether additional legislative changes will be enacted, or whether the current regulations, guidance or interpretations will be changed, or what the impact of such changes on our business, if any, may be.

The former Trump administration released a plan to lower drug prices and reduce out of pocket costs of drugs that contained proposals to increase drug 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.

On July 24, 2020 and September 13, 2020, former President Trump announced several executive orders related to prescription drug pricing that seek to implement several of the administration’s proposals.

The FDA also released a final rule on September 24, 2020, which went into effect on November 30, 2020, providing guidance for states to build and submit importation plans for drugs from Canada .

On November 20, 2020, CMS issued an Interim Final Rule implementing the Most Favored Nation, or MFN, Model under which Medicare Part B reimbursement rates will be calculated for certain drugs and biologicals based on the lowest price drug manufacturers receive in Organization for Economic Cooperation and Development countries with a similar gross domestic product per capita.

The MFN Model regulations mandate participation by identified Part B providers and would have applied in all U.S.

states and territories for a seven-year period beginning January 1, 2021, and ending December 31, 2027.

However, in response to a lawsuit filed by several industry groups, on December 28, 2020, the U.S.

District Court for the Northern District of California issued a nationwide preliminary injunction enjoining government defendants from implementing the MFN Rule pending completion of notice-and-comment procedures under the Administrative Procedure Act.

On January 13, 2021, in a separate lawsuit brought by industry groups in the U.S.

District of Maryland, the government defendants entered a joint motion to stay litigation on the condition that the government would not appeal the preliminary injunction granted in the U.S.

District Court for the Northern District of California and that performance for any final regulation stemming from the MFN Interim Final Rule shall not commence earlier than 60 days after publication of that regulation in the Federal Register.

Further, authorities in Canada have passed rules designed to safeguard the Canadian drug supply from shortages.

If implemented, importation of drugs from Canada and the MFN Model may materially and adversely affect the price we receive for any of our product candidates.

Additionally, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law.

The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers.

Although a number of these and other proposed measures may require authorization through additional legislation to become effective, and the Biden administration may reverse, revoke, or otherwise change these measures, Congress has indicated that it will continue to seek new legislative measures to control drug 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.

It is unclear what effect such changes will have on our business and our ability to receive adequate reimbursement for our future products.

We cannot predict the reform initiatives that may be adopted in the future or whether initiatives that have been adopted will be repealed or modified.

Some of these proposed measures, including drug importation and pharmacy benefit manager rebate rule changes, face legal challenges from industry groups and participants.

We cannot predict whether additional reform initiatives may be adopted in the future or whether initiatives that have been adopted will be repealed or modified, or whether legal challenges will be successful.

The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare may adversely affect:

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This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other.

Although there are several

statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution, they are drawn narrowly, and practices that involve remuner ation intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor.

In addition, the government may assert that a claim including items or services resulting from a violation o f the AKS constitutes a false or fraudulent claim for purposes of the federal False Claims Act or federal civil money penalties statute.

Violations of the AKS carry potentially significant civil and criminal penalties, including imprisonment, fines, admini strative civil monetary penalties, and exclusion from participation in federal healthcare programs.

Although there are several statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution, they are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor.

In addition, the government may assert that a claim including items or services resulting from a violation of the AKS constitutes a false or fraudulent claim for purposes of the federal False Claims Act or federal civil money penalties statute.

Violations of the AKS carry potentially significant civil and criminal penalties, including imprisonment, fines, administrative civil monetary penalties, and exclusion from participation in federal healthcare programs.

The federal anti-inducement law which prohibits, among other things, the offering or giving of remuneration, which includes, without limitation, any transfer of items or services for free or for less than fair market value (with limited exceptions), to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary’s selection of a particular supplier of items or services reimbursable by a federal or state governmental program.

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HIPAA, as amended by the Health Information Technology and Clinical Health Act, or 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.

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.

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State and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payor, including commercial insurers, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of th e lack of applicable precedent and regulations.

Federal and state enforcement bodies continue to give regular and close scrutiny to interactions between healthcare companies and healthcare providers, and such scrutiny often leads to investigations, prosecu tions, convictions and settlements in the healthcare industry.

Ensuring business arrangements comply with applicable healthcare laws, as well as responding to possible investigations by government authorities, can be time- and resource-consuming and can di vert a company’s attention from the business.

Federal and state enforcement bodies continue to give regular and close scrutiny to interactions between healthcare companies, including pharmaceutical manufacturers, and healthcare providers, and such scrutiny often leads to investigations, prosecutions, convictions and settlements in the healthcare industry.

The Affordable Care Act broadened the reach of the fraud and abuse laws by, among other things, amending the intent requirement of the federal Anti-Kickback Statute and the applicable criminal healthcare fraud statutes contained within 42 U.S.C.

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Investors may find our common stock less attractive if we continue to rely on these exemptions.

some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

In addition, the JOBS Act provides that an e merging growth company can take advantage of an extended transition period for complying with new or revised accounting standards.

This allows an emerging growth company to delay the adoption of these accounting standards until they would otherwise apply t o private companies.

If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards.

This allows an emerging growth company to delay the adoption of these accounting standards until they would otherwise apply to private companies.

We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

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Before a security is sold in a state, there must be a registration in place to cover the transaction, or it must be exempt from registration.

The applicable broker-dealer must also be

registered in that state.

If we fail to maintain our Nasdaq Capital Market listing, then we may not be considered to be on a national exchange and do not know whether our securities will be registered or exempt from registration unde r the laws of any state.

The applicable broker-dealer must also be registered in that state.

A determination regarding registration will be made by those broker-dealers, if any, who agree to serve as market makers for our common stock.

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Our principal stockholders and management own a significant percentage of our stock and will be able to exercise significant influence over matters subject to stockholder approval.

As of September 30, 2020, our executive officers, directors and principal stockholders, together with their respective affiliates, owned approximately 32.4% of our common stock, including shares subject to outstanding options that are exercisable within 60 days after such date.

As of March 31, 2021, our executive officers, directors and principal stockholders, together with their respective affiliates, owned approximately 33.46% of our common stock, including shares subject to outstanding options that are exercisable within 60 days after such date.

Accordingly, these stockholders will be able to exert a significant degree of influence over our management and affairs and over matters requiring stockholder approval, including the election of our Board of Directors and approval of significant corporate transactions.

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We have broad discretion in the use of our cash and may not use them effectively.

We currently intend to use our cash and cash equivalents for continuing clinical development of razuprotafib in ocular and other indications, early research on antibody therapies that inhibit VE-PTP, and for working capital and other general corporate purposes.

We currently intend to preserve our cash resources during our efforts to explore strategic alternatives for our company.

Although we currently intend to use our cash and cash equivalents in such a manner, we will have broad discretion in the application of such cash and cash equivalents.

Our failure to apply these funds effectively could affect our ability to continue to develop and

commercialize our product candidates.

Pendin g their use, we may invest our cash and cash equivalents in a manner that does not produce income or loses value.

Pending their use, we may invest our cash and cash equivalents in a manner that does not produce income or loses value.

As a result of becoming a public company, we are incurring increased costs and our management devotes substantial time to public company compliance programs.

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In addition, if we are unable to continue to meet these requirements, we may not be able to maintain our listing on a national securities exchange.

Our management team and Board of Directors will need to devote significant efforts to maintaining adequate and effective disclosure controls and procedures and internal control over financial reporting in order to comply with applicable regulations, which may include hiring additional legal, financial reporting and other finance and accounting staff and engaging consultants to assist in designing and implementing such procedures.

designing and implementing such procedures.

Additionally, any of our efforts to improve our internal controls and design, implement and maintain an adequate system of disclosure controls may not be successful and will require that we expend significant cash and other resources.

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In addition, any future debt financing arrangement may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock.

Accordingly, investors must rely on sales of their common stock after

price appreciation, which may never occur, as the only way to realize any return on their investment.

Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any return on their investment.

As a result, investors seeking cash dividends should not purchase our common stock.

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An inactive trading market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.

Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.

The global credit and financial markets have experienced extreme volatility and disruptions in the past several years, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability.

We believe that the state of global economic conditions are particularly volatile and uncertain, not only in light of the COVID-19 pandemic and the potential global recession resulting therefrom, but also due to recent and expected shifts in political, legislative and regulatory conditions concerning, among other matters, international trade and taxation, and that an uneven recovery or a renewed global downturn may negatively impact our ability to conduct clinical trials on the scale and timelines anticipated.

There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur.

Our general business strategy may be adversely affected by any such economic downturn, volatile business or political environment or continued unpredictable and unstable market conditions.

If the current equity and credit markets deteriorate, it may make obtaining any necessary debt or equity financing more difficult, more costly and more dilutive.

Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon clinical development plans.

In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive an economic downturn, which could directly affect our ability to attain our operating goals on schedule and on budget.

To the extent that our profitability and strategies are negatively affected by downturns or volatility in general economic conditions, our business and results of operations may be materially adversely affected.

Risks Related to Our Charter and Bylaws

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Any provision of our amended and restated certificate of incorporation, our amended and restated by-laws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.

Our charter and bylaws contain exclusive forum provisions, which may limit a stockholder’s ability to bring a claim in a judicial forum it finds favorable and may discourage lawsuits with respect to such claims.

Our amended and restated charter provides that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware (or if such court does not have jurisdiction, the U.S.

District Court for the District of Delaware) will be the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf;

(2) any action asserting a claim of breach of or based on a fiduciary duty owed by any of our current or former directors, officers or other employees to us or our stockholders;

(3) any action asserting a claim against us or any of our current or former directors, officers, employees or stockholders arising pursuant

to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws;

or (4) any action asserting a claim governed by the internal affairs doctrine, or the Delaware Forum Provision.

The Delaware Forum Provision will not apply to any causes of action arising under the Securities Act or the Exchange Act.

Our amended and restated bylaws further provide that, unless we consent in writing to an alternative forum, the U.S.

federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, or the Federal Forum Provision.

We recognize that the Delaware Forum Provision and the Federal Forum Provision may impose additional litigation costs on stockholders who assert the provision is not enforceable and may impose more general additional litigation costs in pursuing any such claims, particularly if the stockholders do not reside in or near the State of Delaware.

Additionally, these forum selection clauses in our amended and restated bylaws may limit our stockholders’ ability to bring a claim in a judicial forum that they find favorable for disputes with us or our directors, officers or employees, which may discourage such lawsuits against us and our directors, officers and employees even though an action, if successful, might benefit our stockholders.

While the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court are “facially valid” under Delaware law, there is uncertainty as to whether other courts will enforce our Federal Forum Provision.

The Federal Forum Provision may also impose additional litigation costs on stockholders who assert the provision is unenforceable, and if the Federal Forum Provision is found to be unenforceable, we may incur additional costs with resolving such matters.

The courts mandated by our charter and bylaws may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders.

Risks Related to Tax

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The costs to eliminate or address the foregoing security threats and vulnerabilities before or after a cyber-incident could be significant.

Our remediation efforts may not be successful and could result in interruptions, delays or cessation of service, and loss of existing or potential suppliers, manufacturers or other third parties.

Our remediation efforts may not be successful and could result in interruptions, delays or cessation of service, and loss of existing or

potential suppliers, manufacturers or other third parties.

In addition, breaches of our security measures and the unauthorized dissemination of sensitive personal, proprietary or confidential information about us, our business partners, participants in our clinical trials or other third parties could expose us to significant potential liability and reputational harm.

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We could also be negatively impacted by existing and proposed laws and regulations, as well as government policies and practices related to cybersecurity, data privacy, data localization and data protection such as GDPR.

We face risks arising from the results of the public referendum held in United Kingdom and its membership in the European Union.

Our business and operations may be negatively impacted by the United Kingdom’s withdrawal from the European Union.

On June 23, 2016, the United Kingdom held a referendum in which a majority of the eligible members of the electorate voted to leave the European Union, commonly referred to as Brexit.

Pursuant to Article 50 of the Treaty on European Union, the United Kingdom ceased being a Member State of the European Union on January 31, 2020.

However, the terms of the withdrawal have yet to be fully negotiated.

The implementation period began February 1, 2020 and will continue until December 31, 2020.

During this 11-month period, the United Kingdom will continue to follow all of the European Union’s rules, the European Union’s pharmaceutical law remains applicable to the United Kingdom and the United Kingdom’s trading relationship will remain the same.

However, regulations (including financial laws and regulations, tax and free trade agreements, intellectual property rights, data protection laws, supply chain logistics, environmental, health and safety laws and regulations medicine licensing and regulations, immigration laws and employment laws), have yet to be addressed.

This lack of clarity on future United Kingdom laws and regulations and their interaction with the European Union laws and regulations may negatively impact foreign direct investment in the United Kingdom, increase costs, depress economic activity and restrict access to capital.

The uncertainty concerning the United Kingdom’s legal, political and economic relationship with the European Union after Brexit may be a source of instability in the international markets, create significant currency fluctuations, and/or otherwise adversely affect trading agreements or similar cross-border co-operation arrangements (whether economic, tax, fiscal, legal, regulatory or otherwise) beyond the date of Brexit.

These developments, or the perception that any of them could occur, may have a significant adverse effect on global economic conditions and the stability of global financial markets, and could significantly reduce global market liquidity and limit the ability of key market participants to operate in certain financial markets.

In particular, it could also lead to a period of considerable uncertainty in relation to the United Kingdom financial and banking markets, as well as on the regulatory process in Europe.

Asset valuations, currency exchange rates and credit ratings may also be subject to increased market volatility.

If the United Kingdom and the European Union are unable to negotiate acceptable agreements or if other European Union Member States pursue withdrawal, barrier-free access between the United Kingdom and other European Union Member States or among the European Economic Area overall could be diminished or eliminated.

The long-term effects of Brexit will depend on any agreements (or lack thereof) between the United Kingdom and the European Union and, in particular, any arrangements for the United Kingdom to retain access to European Union markets either during a transitional period or more permanently.

Such a withdrawal from the European Union is unprecedented, and it is unclear how the United Kingdom’s access to the European single market for goods, capital, services and labor within the European Union, or single market, and the wider commercial, legal and regulatory environment, will impact our current and future operations, including our relationships with existing and potential suppliers, manufacturers and other third parties.

We may also face new regulatory costs and challenges that could have an adverse effect on our operations.

Depending on the terms of the United Kingdom’s withdrawal from the European Union, the United Kingdom could lose the benefits of global trade agreements negotiated by the European Union on behalf of its members, which may result in increased trade barriers that could make our doing business in the European Union or European Economic Area more difficult.

In addition, the measures could potentially have corporate structural consequences, adversely change tax benefits or liabilities in these or other jurisdictions and could disrupt some of the markets and jurisdictions in which we operate.

Any of these effects of Brexit, among others, could materially adversely affect the business, business opportunities, and financial condition of our Company.

There was a transitional period, during which European Union’s rules continued to apply in the United Kingdom, however this ended on December 31, 2020.

The United Kingdom and European Union have signed a EU-UK Trade and Cooperation Agreement, which became provisionally applicable on January 1, 2021 and will become formally applicable once ratified by both the United Kingdom and the European Union.

This agreement provides details on how some aspects of the United Kingdom and European Union’s relationship regarding medicinal products will operate, particularly in relation to Good Manufacturing Practice, however there are still many uncertainties.

Many of the regulations that now apply in the United Kingdom following the transition period (including financial laws and regulations, tax, intellectual property rights, data protection laws, supply chain logistics, environmental, health and safety laws and regulations, medicine approval and regulations, immigration laws and employment laws), will likely be amended in future as the United Kingdom determines its new approach, which may result in significant divergence from European Union regulations.

This lack of clarity on future United Kingdom laws and regulations and their interaction with the European Union laws and regulations increases our regulatory burden of operating in and doing business with both the United Kingdom and the European Union.

The long-term effects of Brexit will depend in part on how the EU-UK Trade and Cooperation Agreement, and any future agreements signed by the United Kingdom and the European Union, take effect in practice.

Such a withdrawal from the European Union is unprecedented, and it is unclear how the restrictions on the United Kingdom’s access to the European single market for goods, capital, services and labor and the wider commercial, legal and regulatory environment, could impact our current and future operations and clinical activities in the United Kingdom.

We may also face new regulatory costs and challenges that could have an adverse effect on our operations as a result of Brexit.

The United Kingdom will lose the benefits of global trade agreements negotiated by the European Union on behalf of its members, which may result in increased trade barriers that could make our doing business in the European Union or European Economic Area more difficult.

We expect that, now the transition period has expired, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which European Union laws to replicate or replace, including those related to the regulation of medicinal products.

Any of these effects of Brexit, and others we cannot anticipate, could negatively impact our business and results of operations in the United Kingdom.

The uncertainty concerning the United Kingdom’s legal, political and economic relationship with the European Union following Brexit may also be a source of instability in the international markets, create significant currency fluctuations, and/or otherwise adversely affect trading agreements or similar cross-border co-operation arrangements (whether economic, tax, fiscal, legal, regulatory or otherwise).

Unregistered Sales of Equity Securities and Use of Proceeds

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

What changed 10-Q

Item 1A. Risk Factors